SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

   X     ANNUAL  REPORT  PURSUANT  TO  SECTION  13 or  15(d)  OF THE  SECURITIES
 ----    EXCHANGE ACT OF 1934

                   FOR THE FISCAL YEAR ENDED OCTOBER 31, 1999

                                       OR

         TRANSITION  REPORT  PURSUANT  TO SECTION 13 or 15(d) OF THE  SECURITIES
 ----    EXCHANGE ACT OF 1934

         For the transition period from __________ to __________

                         Commission file number 0-27022
                            OPTICAL CABLE CORPORATION
             (Exact name of registrant as specified in its charter)


         Virginia                                             54-1237042
  (State of incorporation)                                 (I.R.S. Employer
                                                           Identification No.)

    5290 Concourse Drive
   Roanoke, Virginia  24019                                  (540) 265-0690
    (Address of principal                                   (Telephone Number)
     executive offices)

Securities registered pursuant to Section 12(b) of the Act:

                                            None

Securities registered pursuant to Section 12(g) of the Act:

                           Common Stock, no par value

      Indicate by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. (1) Yes X   No    (2) Yes X    No
                                                 ---    ---        ---

      Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.

      The   aggregate   market   value  of  shares  of  common   stock  held  by
affiliates at January 14, 2000 was $25,400,547.

      As of January 14, 2000, 37,465,746 shares of the Registrant's Common Stock
were outstanding.


                                       1
<PAGE>

                       DOCUMENT INCORPORATED BY REFERENCE

Portions of Optical Cable Corporation's  definitive Proxy Statement for its 2000
Annual  Meeting of  Shareholders  to be filed with the  Securities  and Exchange
Commission  pursuant to Regulation 14A under the Securities Exchange Act of 1934
(the "Proxy Statement") are incorporated by reference into Part III of this Form
10-K.

                                     PART I

ITEM 1.    BUSINESS

GENERAL

      The Company  manufactures  and markets a broad range of fiber optic cables
for "high bandwidth"  transmission of data, video and audio  communications over
moderate  distances of up to approximately  [10] miles. The Company's cables can
be used both  indoors and  outdoors,  are easy and  economical  to install,  and
provide a high degree of reliability. The Company believes that its products are
widely  accepted  for use in fiber optic local area  networks  ("LANs")  and are
increasingly  accepted  in  other  communications  applications.  The  Company's
products directly address the needs of the moderate distance market by utilizing
a tight-buffered coating that protects the optical fiber and a cable design that
achieves superior mechanical and environmental performance.

      The Company was incorporated in Virginia in 1983. The Company's  executive
offices are located at 5290 Concourse Drive, Roanoke,  Virginia 24019, telephone
number (540) 265-0690.

INDUSTRY BACKGROUND AND MARKETS

      Application of Fiber Optic Communications Technology

      Fiber optic  technology was developed in the mid-1970s as a communications
medium offering numerous technical  advantages over metallic  conductors such as
copper.  Optical fiber is an ultrapure glass structure that has been pulled into
a hair thin strand. Optical fiber's advantages include its high bandwidth, which
permits reliable  transmission of complex signals such as multiple  high-quality
audio and video channels, high-speed data formats such as Fiber Distributed Data
Interface   ("FDDI")  and   Asynchronous   Transfer  Mode  ("ATM"),   other  LAN
transmissions, and high-definition television. Relative to copper, optical fiber
has thousands of times the  information  carrying  capacity,  occupies much less
space and operates  more  reliably over greater  distances.  Furthermore,  it is
immune to the  electromagnetic  interference  that causes  static in copper wire
transmission,  as well as to electrical  surges.  Because optical fiber does not
carry electricity, it is a safer choice in flammable environments. Additionally,
communicating  through  optical fiber is more secure than copper because tapping
into fiber optic cable without  detection is very difficult.  Optical fiber also
enjoys technical  advantages over other  communications  media such as satellite
and  microwave   communications,   particularly  in  applications  over  shorter
distances.

      Because most of the world's  information  storage,  reception  and display
systems (such as  computers,  telephones  and  televisions)  are  electronically
based, various electro-optical  hardware components must be attached to each end
of an optical  fiber.  For instance,  a laser or light  emitting  diode converts
electrically  encoded  information  into light  signals,  which  travel over the
optical  fiber to the  terminal  point of  reception.  At the  terminal  point a
photodetector  converts the information back to its original form. Other passive
optical  components such as optical connectors and splices facilitate the travel
of  a  light   signal  from  one   optical   fiber  to  another  or  to  another
electro-optical  component,  while  couplers  and  splitters  combine  or divide
signals, thereby permitting simultaneous  distribution of information to or from
multiple locations. The cost of the necessary  electro-optical  transmitters and
recorders have been reduced to the point where fiber optic-cable is economically
feasible for many moderate distance applications.

                                       2
<PAGE>

      Like copper  cable,  fiber optic cable is restricted  to  applications  in
which it is possible  to lay cable  between  the point of  transmission  and the
point of reception. Wireless communication media do not have this limitation.

      The Long Distance Telephone Market

      Private  industry  initially  developed  optical  fiber  systems  for long
distance commercial applications,  particularly the U.S. telephone networks. For
the long  distance  telephone  market,  "single mode" optical fiber is generally
used.  To protect the optical  fiber  without  adversely  affecting  its optical
performance,  fiber optic cable producers use a high-density  (i.e.,  high fiber
count)  "loose tube" cable  construction.  This cable design was intended to put
many optical fibers in a small,  relatively  inexpensive  cable. To protect such
cables from water penetration,  manufacturers add a water-blocking but flammable
gel, making them unsuitable for indoor use.

      U.S. long distance carriers have aggressively installed fiber optic routes
across the United States.  Since the late 1980s,  optical fiber has  constituted
nearly all of the long distance  telephone  network,  as well as the interoffice
local exchange network connecting central telephone offices in the same area.

      The Moderate Distance Market

      In the 1970s the U.S.  government  made  available  substantial  funds for
research and  development  to  determine  the  viability  of optical  fiber as a
solution to critical  communications  problems  faced by the  military and other
agencies.  In the course of addressing these challenging,  multiple  termination
point applications,  which were predominately over moderate distances, engineers
achieved  significant   technological   advances.  Such  advances  included  the
introduction   of   "multimode"   optical  fiber  and  the   development  of  an
easy-to-handle  "tight-bound"  cable  structure  that afforded the optical fiber
effective  protection against mechanical shock, water,  extreme temperatures and
other stresses likely to be encountered in a battlefield environment.

      High levels of production of optical  fiber,  cable and components for the
long  distance  telephone  market  since the  mid-1980s  have  resulted  in cost
reductions  that make fiber  optic  cable  economically  feasible  for a growing
number of potential customers with moderate distance business application needs.
Such applications include data communications,  LANs, telecommunications,  video
transmission,  including cable television, and military tactical communications.
Particularly in data  communications,  high performance,  rugged, and survivable
fiber  optic  cable is well suited and has become  economically  attractive  for
diverse and often unpredictable installation environments.  The Company believes
that the LAN market is  particularly  attractive.  LANs are often  installed  at
corporate  offices,  hospitals,  utilities,  academic  campuses,  factories  and
transportation management facilities.

      The  increasing  standardization  of  communications  technology  and  the
increasing  demand for high bandwidth  (i.e.,  high data capacity or volume) are
expected to  facilitate  optical  fiber's  further  penetration  of the moderate
distance market  presently  served by copper cable.  Fiber optic cable is better
able to maximize the utility of emerging LAN interface  standards,  such as FDDI
and ATM, and has  therefore  become a preferred  data  transmission  medium.  In
addition, high speed, high bandwidth  applications,  such as video conferencing,
imaging and Internet  access,  are growing and are driving  increased demand for
fiber optic cable in moderate distance applications.

      The large cable television companies, often referred to as Multiple System
Operators,   the  Regional  Bell  Operating  Companies   ("RBOCs"),   and  other
independent  long  distance  carriers are  competing to provide  enhanced  cable
television,   data,  and  other  information   highway  services  to  homes  and
businesses.  Many of these  companies  have  begun to use,  on a limited  basis,
optical fiber systems in the portion of the U.S.  telephone  networks which lies
between telephone  companies' central offices and subscribers' offices and homes
(the  "subscriber  loop").  To date, the subscriber loop remains  overwhelmingly
copper.  Because the subscriber  loop represents  approximately  90% of the U.S.
telephone system  (measured by total length of cable),  the potential demand for
fiber optic cable in this  application is very large,  provided that cost parity
with copper cable systems can be achieved.

                                       3
<PAGE>

THE COMPANY'S SOLUTION

      Fiber  optic  cables  used  for  moderate  distance  applications  may  be
subjected  to  many  different  stress  environments.  Cables  installed  inside
buildings may be routed through cable trays, floor ducts, conduits and walls and
may encounter  sharp  corners or edges.  They may be pulled  without  lubricant,
resulting in higher pull tensions, and stressed to the breaking point if care is
not  used.  In the  outdoor  and  underground  environments,  cables  are  often
subjected to moisture, ultra-violet radiation and long pulling distances through
conduits  with a  variety  of  bends  and  corners,  resulting  in high  pulling
tensions.  These  conditions  can be aggravated if installers are not adequately
trained  in the  installation  of fiber  optic  cable.  The  Company's  founders
recognized  that,  for many  applications,  the  stresses  on the cables  during
installation  are similar to those in the  military  tactical  environment,  for
which the Company's technology was initially developed. The Company applied this
technology to commercial  products serving a market that could not be adequately
served by  gel-filled,  loose  tube  cable  manufactured  for the long  distance
telephone market.

      The Company believes that nearly one-half of the fiber optic cable sold in
the moderate  distance  market today is the gel-filled,  loose tube type,  which
requires  careful  installation  and extensive  preparation for termination with
connectors.  While this cable  design  has  served the long  distance  telephone
market  reasonably well, it was not designed to withstand the stress that cables
undergo  during  installation  in  the  LAN  or  subscriber  loop  environments.
Gel-filled,  loose tube  cables are  difficult  to  terminate  with  connectors,
because they cannot be  mechanically  attached  directly to the cable's  optical
fibers.  Designed  for long,  straight  outdoor  runs,  the cables are stiff and
difficult  to place in  complex  installations  and are  flammable  and thus not
suited for indoor use. When used for indoor/outdoor installations,  these cables
must be spliced near the building  entrance to flame  retardant  cables suitable
for indoor use, adding cost and complexity and reducing reliability.  Therefore,
the total  installed cost of  gel-filled,  loose tube cables is high in moderate
distance applications.

      In  contrast,  the  Company's  products  address the needs of the moderate
distance market by utilizing a tight-buffered  coating that protects the optical
fiber and a cable design that achieves  superior  mechanical  and  environmental
performance.  The  Company's  products  are derived from  technology  originally
developed for military applications requiring very rugged,  flexible and compact
fiber optic cables.  Unlike gel-filled  cables, the Company's cables may be used
indoors and outdoors,  are flame  resistant,  flexible,  easy and  economical to
install,  and provide a high degree of  reliability.  The Company  believes that
because of these  features,  its products  are widely  accepted for use in fiber
optic LANs and are increasingly accepted in other applications.

THE COMPANY'S STRATEGY

      The Company's  primary strategy is to capitalize on its proprietary  cable
manufacturing  processes and  technologies  to provide a  comprehensive  line of
versatile fiber optic cables with superior features and competitive pricing that
appeals  to  the  large,   diverse  and  growing   market  for  high   bandwidth
communications over moderate distances.

      Focus on the Moderate Distance Market

      Optical fiber has become an accepted medium for the  transmission of data,
video and audio in moderate  distance  applications in cities,  factories,  high
rise  buildings,  and on  campuses.  High  speed,  high  bandwidth  applications
deployed in LAN  environments  are growing in both large and small  corporations
and are driving  increased  demand for optical fiber.  Increasing  deployment of
multimedia  systems  on LANs that  utilize  protocols  such as FDDI and ATM also
enhances the demand for bandwidth.

      The Company's  products address the needs of the moderate  distance market
by  utilizing a  tight-buffered  coating that  protects the optical  fiber and a
cable design that achieves superior  mechanical and  environmental  performance.
The Company believes that because of the outstanding features of its fiber optic
cable,  including  suitability  for indoor and outdoor use, easy and  economical
installation  and  a  high degree of  reliability,  the Company's products  have

                                       4
<PAGE>

become well established for optical fiber LANs and are increasingly accepted for
other applications.

      Develop High Performance Products and Offer a Broad Product Line

      The Company  believes  that serving both the premium  performance  and the
price  competitive  parts of the  moderate  distance  market best  utilizes  its
development and manufacturing  capabilities.  The Company's  Ultra-FoxTM product
line  provides  optical  fiber  products  that are  competitively  priced,  with
features that the Company believes are superior to its  competitors'  offerings.
The Ultra-FoxTM plus product line shares many of the materials and features with
the Company's  military tactical cable products and is marketed to customers who
want the most reliable installations for their critical communication or control
processes.  Since January 1994, the Company's quality management system has been
certified to the internationally recognized ISO 9001 quality standard.

      Leverage Existing Technologies and Knowledge

      The  Company  has  extensive  expertise  in optical  fiber  packaging  and
applications  design,  which  it  utilizes  for new  products.  The  Company  is
responsive to, and works to anticipate the requirements  of, its customers.  Its
expertise with tight-buffered  cable technology  facilitates  development of new
products and variations of existing products.  Products that are developed for a
special application also may be introduced to the broader market.

      Capitalize on Proprietary, Automated Manufacturing Processes

      The Company believes that its customized,  internally developed and highly
automated manufacturing  processes provide a competitive advantage.  The Company
has developed  proprietary  process  control  systems to ensure  consistency and
uniformity  at  high  throughput  rates.  Ample  capacity,  versatile  automated
production  processes  and a broad range of products  are intended to enable the
Company to be flexible and responsive to customer needs.

      Offer Cost Effective Solutions to its Customers

      The  Company  believes  that its  products  are  rugged,  easy to install,
versatile  and  highly   reliable,   making  them  attractive  to  distributors,
installers,  and most importantly,  end users.  Because the Company's cables are
multipurpose,   distributors  can  stock  fewer  varieties  and  therefore  less
quantities of cable.  For installers and systems  integrators,  the multipurpose
feature can significantly  reduce  installation costs by eliminating the need to
transition from indoor cable to outdoor cable at a building entrance.  This also
enhances  reliability by eliminating splices and possible high stress on optical
fibers that could lead to breakage. This simplified installation, lower cost and
enhanced  reliability  are also valued by the end user,  because a long lasting,
trouble-free  cable is the basis for minimizing down time and maximizing  system
availability.

      Distribution and Marketing Presence

      The Company distributes its products through  independent  distributors to
supplement  the  Company's  existing  distribution  channels  and to provide the
Company  with access to a greater  number of  potential  customers in the United
States. Revenues from international sales were approximately 27%, 22% and 20% in
fiscal 1997, 1998 and 1999, respectively.  The Company does not separately track
gross profit or expenses attributable to international sales.  Management of the
Company   does  not   regularly   evaluate   international   sales  by   region.
Substantially,  all of the Company's international sales are denominated in U.S.
dollars.  The  Company  has no  material  assets  located  outside of the United
States. (See also Note 9 to the Financial Statements which begins on page 34.

                                       5
<PAGE>

      Working  with  IBM's  E-Commerce   division,   the  Company  launched  its
E-Commerce website  (http://purchasing.occfiber.com)  in March 1999.  Initially,
the  E-commerce  site will include only the Company's  product line. The Company
intends to look for  opportunities to establish  strategic  alliances with other
leading  suppliers of  communications  equipment to expand the web-site's future
offerings and eventually create an independent  communications  superstore which
would offer one-stop shopping to global purchasers of communication materials.

PRODUCTS AND TECHNOLOGY

      Products

      The Company  manufactures  and markets a broad range of fiber optic cables
that  provide  a  high  bandwidth   transmission   for  data,  video  and  audio
communications over moderate distances.  The Company's products are derived from
technology originally developed for military applications requiring very rugged,
flexible and compact  fiber optic  cables.  The  Company's  method of applying a
tight-buffered  coating on each  optical  fiber  before it is encased  minimizes
microbending, the primary cause of signal loss in optical fibers.

      The Company has  pioneered a  pressure-extrusion  technique for applying a
cable jacket  directly  over the fiber optic cable core  elements,  resulting in
high cable tensile strength and lateral stress  resistance.  Such  Core-LockedTM
jackets  allow the cable to  operate  as a single  mechanical  unit,  maximizing
resistance  to tears  during  installation  pulls  through  narrow  spaces.  The
Company's product line is deliberately diverse and flexible, in keeping with the
evolving  application  needs within the moderate  distance  market.  Most of the
Company's  cable  designs are  available  in both the  Ultra-FoxTM  Plus premium
product and the  Ultra-FoxTM  highly  featured but cost  competitive  commercial
product.

                      [The remainder of this page is blank]


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<PAGE>

<TABLE>
<CAPTION>

              Product Type                        Features/Description                     Applications
              ------------                        --------------------                     ------------
<S>                                      <C>                                 <C>
     A-Series Simplex and Duplex          simplex (one optical fiber)          short "patch cord" cables
       "Assembly" Cables                   and duplex (two optical             links between electronic
                                          fibers) cables                       equipment and main fiber
                                          tight-buffered coating on            optic cable
                                          each optical fiber                   routing connections in
                                          aramid yarn strength                 patching systems
                                          members                              indoor use
                                          thermoplastic outer jacket
                                          flame retardant

     B-Series "Breakout"                  2 to 156 optical fibers              direct termination with
       Cables                             tight-buffered coating on             connectors on each optical
                                          each optical fiber                   fiber
                                          elastomeric jacket                   short and moderate distance
                                          encases each optical fiber           links between buildings or
                                          and surrounding aramid               within a building, where
                                          yarn strength members                multiple termination points
                                          (similar to an A-Series              are needed
                                          simplex cable)                       installations where ease of
                                          Core-LockedTM outer                  termination and termination
                                          jacket                               cost are important factors
                                          rugged                               indoor and outdoor use
                                          flame retardant
                                          moisture and fungus
                                          resistant

     D-Series "Distribution"              2 to 156 optical fibers              longer distance runs where
       Cables                             tight-buffered coating on            size and cable cost are
                                          each optical fiber                   more significant
                                          Core-LockedTM outer                  can be armored for
                                          jacket encases the optical           additional protection in
                                          fibers and aramid yarn               buried and overhead
                                          strength members                     installations
                                          smaller, lighter and less            indoor and outdoor use
                                          expensive than the B-
                                          Series cable
                                          high strength to weight
                                          ratio
                                          compact size
                                          rugged
                                          flame retardant
                                          moisture and fungus
                                          resistant

     G-Series "Subgrouping"               up to 864 optical fibers in          high fiber count systems
       Cables                             various subgroup sizes               subgroups needed to
                                          multi-fiber subcables, each          facilitate organization of
                                          similar to a D-Series cable          large numbers of optical
                                          Core-LockedTM outer                  fibers
                                          jacket surrounds                     subcables routed to different
                                          subcables                            locations
                                          high density "micro"                 installations requiring
                                          construction                         several different optical fiber
                                          rugged                               types
                                          flame retardant                      indoor and outdoor use
                                          moisture and fungus
                                          resistant

</TABLE>

                                       7
<PAGE>


    A-Series Simplex and Duplex "Assembly" Cables. Simplex and duplex cables are
round  single  fiber and "zip cord"  two-fiber  structures,  respectively.  Both
cables contain tight-buffered optical fibers, aramid yarn strength members and a
thermoplastic  outer jacket for each fiber.  They are used for "jumpers"  (short
length patch cords) and for "pigtails"  (short lengths of cable with a connector
on one end). Various outer jacket materials are offered to provide  flammability
ratings and handling  characteristics tailored to customers' needs. These cables
are  often  privately  labeled  and  sold to  original  equipment  manufacturers
("OEMs") who produce the cable assemblies.

    B-Series  "Breakout"  Cables.  The  B-Series  cables  consist of a number of
subcables,  each  consisting of a single  optical fiber and aramid yarn strength
members similar to an A-Series simplex cable. These subcables are tight-bound in
a pressure-extruded, high performance Core-LockedTM PVC outer jacket to form the
finished multi-fiber cable. Like the A-Series cables, the subcables are intended
to be terminated directly with connectors. This direct termination feature makes
this cable type particularly  suited for shorter distance  installations,  where
there are many  terminations  and termination  costs are more  significant.  The
materials  and  construction  of the  cable  permit  its use  both  indoors  and
outdoors.  These  features  make the cable cost  effective for use in campus and
industrial complex installations, between and within buildings.

    D-Series  "Distribution" Cables. The Company's D-Series cables are made with
the same  tight-buffered  optical fiber and high performance  Core-LockedTM  PVC
outer jacket as the B-Series  cable.  Unlike the B-Series cable,  however,  each
tight-buffered  optical fiber in a D-Series cable is not covered with a separate
subcable  jacket.  D-Series cable is intended for longer distance  applications,
where  termination  considerations  are less  important and often traded off for
size,  weight and cost. The  tight-buffered  optical fiber and Core-LockedTM PVC
outer  jacket  make  D-Series  cables  rugged  and  survivable,  with  a  small,
lightweight  configuration.  The high  strength to weight  ratio of these cables
makes them well suited for  installations  where long  lengths of cables must be
pulled through duct systems.  D-Series cable is used in relatively longer length
segments of installations.

    G-Series  "Subgrouping"  Cables.  This  cable  design  combines  a number of
multi-fiber  subcables,  each  similar to a  D-Series  cable.  Each  multi-fiber
subcable  is  tight-bound  with  an  elastomeric  jacket,   providing  excellent
mechanical and  environmental  performance.  These  subcables are contained in a
pressure extruded,  high performance  Core-LockedTM PVC outer jacket to form the
finished  cable.  This design permits the  construction of very high fiber count
cables.  These cables may be used where  groups of optical  fibers are routed to
different locations.  The Company has fabricated a developmental sub-group cable
containing over 1,000 fibers  intended for high density,  moderate length routes
such as urban telephone distribution systems.

    Other Cable Types.  The Company  produces many variations on the basic cable
styles  presented  above  for  more  specialized   installations.   For  outdoor
applications,  both  the  B-Series  and  D-Series  cables  may be  armored  with
corrugated  steel  tape  for  further  protection  in  underground  or  overhead
installations.  For overhead  installations on utility poles, the Company offers
several self-supporting versions of the D-Series cables, with higher performance
outer jackets.  One contains additional aramid yarn strength members, to support
its weight  with wind and ice loading  over long  unsupported  lengths.  Another
style has a separate  strength  member,  either metallic or  non-metallic,  in a
figure eight  configuration,  to reduce installation costs. The Company's cables
are available in several  flammability  ratings,  including  "plenum" for use in
moving air spaces in buildings,  and "riser" for less critical  flame  retardant
requirements.  "Zero halogen"  versions of the B-Series and D-Series  cables are
available  for use in enclosed  spaces  where there is concern  over  release of
toxic gases during fire. Composite cables combining optical fiber and copper are
offered to facilitate the transition from  copper-based  to optical  fiber-based
systems without further installation of cable.



                                       8
<PAGE>

    Product Development

    The  Company   continues   to  develop   enhancements   to  its   automated,
computer-controlled  production  processes  that it  believes  increase  product
quality and reduce costs. Many of the Company's  technological  advances are the
result  of  refinements   and   improvements   made  during   production   runs.
Occasionally, potential customers contact the Company to develop new products or
modified  product  designs  for  them,  which  ultimately  may  appeal  to other
customers.  The  development  costs  associated  with new  products and modified
product  designs  requested by the customer are included in the price charged to
that customer. By utilizing these new products and modified product designs, the
Company  continues to improve its product line with minimal direct  expenditures
for research and development.

MAJOR MARKET APPLICATIONS

    The most common  application  of the  Company's  products is in LANs,  where
optical fiber is widely used as the "backbone" or "trunk,"  connecting groups of
work stations and central file servers. In its typical implementation, the fiber
optic cable may be installed between wiring closets in a building,  or installed
between  buildings in a multi-building  complex.  Fiber optic cable runs between
electronic equipment that combines the signals of many workstations. Because the
combined signals may carry a large volume of critical  information,  fiber optic
cable,  which  is  immune  to  electrical  interference,  is often  desired.  In
comparison,  copper  wires  carry  less  information,  or  the  same  amount  of
information  for a shorter  distance,  in either case  remaining  susceptible to
electrical noise and  interference.  The following are typical  applications for
the Company's fiber optic cable:

    Office Facilities. Banks, stock trading companies,  insurance companies, and
other  businesses  often  have a need to  distribute  information  among a large
number of workstations,  have time-critical data and would incur severe costs as
a result of system  failures.  A LAN connected with fiber optic cable has in the
past several years been an increasingly  common way of  implementing  management
information systems for these businesses.

    Educational  Institutions.  Colleges and  universities  have been leaders in
implementing large fiber optic networks. Many states have undertaken large-scale
projects to install  networks  in high  schools  and even grade  schools.  These
systems  link  personal  computers  with central file  servers.  As  interactive
learning systems require increased  transmission speeds, optical fiber becomes a
logical medium.

    Manufacturing and Mining Facilities. Manufacturing and mining facilities are
typically  not  air  conditioned,  are  less  clean  and  otherwise  have a less
controlled environment than other types of businesses.  They often contain heavy
electrical equipment, which causes electromagnetic  interference if conventional
copper cable is used.  The  advantages of fiber optic cable in this  environment
include immunity to electrical  noise,  ruggedness,  high  information  carrying
capacity and greater distance  capability.  The Company's products are installed
in  automotive  assembly  plants,  steel plants,  chemical and drug  facilities,
petroleum refineries, mines and other similar environments.

    Health Care  Facilities.  Hospitals  have  extensive data transfer needs for
medical records, patient monitoring,  inventory,  billing and payroll functions.
The transfer of electronically  stored images of x-rays,  MRIs and CAT scans has
increased to  facilitate  analysis and  diagnosis at multiple  locations.  These
applications  require high data  transfer  rates.  Optical  fiber is a preferred
solution,  especially  in  electromagnetic  environments  with heavy  electrical
equipment such as x-ray machines.

    Traffic Control Systems. Traffic system applications range from surveillance
and control of traffic flow in cities to installation of sensors, automatic toll
collection,  video monitoring and control of signs in "smart" highway  programs.
These applications often require  transmission of high bandwidth signals such as
video monitoring,  for which optical fiber is well suited.  The Company's cables
offer  ruggedness,  reliability and cost savings for termination in systems that
are near the vibrations of traffic and require many termination points.

    Telephone  Companies.  The Company has worked with  several  RBOCs for their
business customers' requirements.  As high bandwidth services of the information
highway  are  brought  closer to more homes and  businesses,  the  bandwidth  of
optical fiber becomes more important.


                                       9
<PAGE>

SALES, MARKETING AND CUSTOMER SERVICE

    The Company's products are sold to end users, electrical contractors, system
integrators,    value-added   resellers   ("VARs"),   OEMs   and   distributors.
Additionally,  the Company has plans to establish a subsidiary  which will offer
the Company's  products over the Internet.  Distribution  methods are adapted to
the particular  needs of different types of customers.  The decision to purchase
the  Company's  products  may be made  by end  users,  distributors,  electrical
contractors,  system integrators or specialized installers. The Company attempts
to reach these decision makers by advertising in fiber optics trade journals and
other  communications  magazines.  The  Company  also  participates  in numerous
domestic and  international  trade shows  attended by customers and  prospective
customers.  International sales are made primarily through foreign distributors,
system integrators and VARs.

    The   Company's   field  sales   force   consists   of   independent   sales
representatives  located in various  geographic  areas.  The field  sales  force
provides  sales  support  for  distributors,  system  integrators  and  VARs and
communicates with the customer's purchase decision makers. The field sales force
is  supported  by inside  sales  personnel  and  supervised  by  regional  sales
managers.  The inside sales group provides quotations and customer service.  The
regional sales managers  provide  on-site sales support with major customers and
are  responsible  for  major  customers  and  opportunities.  For more  in-depth
technical  support,  the sales group has access to engineering,  quality control
and  management  personnel who have  extensive  fiber optic cable  expertise and
industry experience.

    Furthermore,  the  Company  believes  that it has a  reputation  for product
excellence  based on its  success  with  large  projects  for end users  such as
Chrysler  Corporation,  3M, Virginia Polytechnic Institute and State University,
Bankers Trust and Salomon  Brothers Inc, and for  integrators  such as Ameritech
Information  Systems  and US WEST.  The  Company  had no  single  customer  that
accounted  for more  than 5% of its net  sales  in  fiscal  1997,  1998 or 1999.
However, in fiscal 1997, 1998 and 1999, 21.7%, 27.3% and 30.6%, respectively, of
net sales were  attributable  to two major  domestic  distributors.  Most of the
Company's  revenue in each quarter results from orders received in that quarter.
Accordingly,  the Company  does not believe  that its backlog at any  particular
point in time is  indicative  of future  sales.  The Company  believes  that its
customer base is diverse,  crossing over many markets and regions  worldwide and
believes that it is important to maintain that diversity to avoid  dependence on
any particular segment of the economy or area of the world.

MANUFACTURING AND SUPPLIERS

    The Company's manufacturing  operations consist of applying a variety of raw
plastic materials to optical fibers.  The key raw material in the manufacture of
the Company's products is optical fiber,  which the Company currently  purchases
from four  manufacturers.  The  Company  works with its  vendors in an effort to
ensure a  continuous  supply.  The Company  utilizes two sources for the cable's
aramid yarn  strength  member and several  suppliers of coating  materials.  The
Company has not experienced difficulty in arranging alternate sources. All other
raw materials have at least one backup source.

    The Company  believes  that by  maintaining a consistent  relationship  with
suppliers, it can obtain better quality control and emergency deliveries.  Being
able to deliver  product on time has been an important  factor in the  Company's
success.  To date, the Company has been able to obtain adequate  supplies of its
raw materials in a timely manner from existing sources or, when necessary,  from
alternate sources.  However, any disruption in the supply of raw materials could
adversely  affect the Company's  cable  production  capability and its operating
results.

    The Company  believes that other fiber optic cable  manufacturers  generally
carry minimal amounts of raw materials and finished goods inventory. The Company
generally  holds raw materials and finished goods  inventory in amounts  greater
than  that of its  competitors  to ensure a quick  response  after  receiving  a
customer's order.

    The Company believes its quality control  procedures have been  instrumental
in achieving  the  performance  and  reliability  of its  products.  The Company
produces cable using the quality control  procedures of MIL-I-45208 (the primary
standard applicable to most government purchasers of cable).

                                       10
<PAGE>

    Since  January  1994,  the  Company's  quality  management  system  has been
certified to the internationally  recognized ISO 9001 quality standard. ISO 9000
is a  series  of  standards  agreed  to by the  International  Organization  for
Standardization  (ISO).  ISO  9001 is the  highest  level of  accreditation  and
includes  an  assessment  of 20  elements  covering  various  aspects  of design
development,  procurement, production, installation and servicing. The Company's
certification  was  obtained  through  an  audit  by a  qualified  international
certifying  agency.  In order to maintain  its  certification,  the Company must
continue to comply with the standards.

PROPRIETARY RIGHTS

    None  of the  Company's  current  manufacturing  processes  or  products  is
protected  by patents.  The Company  relies on a  combination  of trade  secret,
copyright and trademark law, nondisclosure  agreements and technical measures to
establish and protect its rights pertaining to its production  technology.  Such
protection  may  not  deter   misappropriation  or  preclude   competitors  from
developing production  techniques or equipment with features identical,  similar
or superior to the Company's. The Company believes, however, that because of the
rapid  pace of  technological  change in the data  communications  industry  and
particularly  in the  fiber  optic  cable  segment,  legal  protection  for  the
Company's  products is less  significant  to the  Company's  prospects  than the
knowledge,  ability and expertise of its management and technical personnel with
respect to the timely  development  and  production  of new products and product
enhancements.  The Company  considers its proprietary  knowledge with respect to
the  development  and  manufacture of fiber optic cable to be a valuable  asset.
This expertise enables the Company to formulate new cable compositions,  develop
special  coatings  and  coating  methods,  develop and  implement  manufacturing
improvements   and  quality  control   techniques,   and  design  and  construct
manufacturing and quality control equipment. The Company restricts access to its
manufacturing  facility  and  engineering  documentation  to maintain  security.
Employees are required to sign nondisclosure agreements.

    The  Company  believes  that  none  of its  products,  trademarks  or  other
proprietary rights infringes upon the proprietary rights of others. There can be
no assurance,  however,  that third parties will not assert  infringement claims
against  the  Company in the future  with  respect to the  Company's  present or
future  products which may require the Company to enter into license  agreements
or result in protracted and costly litigation,  regardless of the merits of such
claims.

COMPETITION

    The market for fiber optic cable,  including the moderate distance market in
which the Company's  products are concentrated,  is highly  competitive.  Siecor
Corp. (a joint venture of Siemens AG and Coming) and Lucent Technologies are the
leading  manufacturers of fiber optic cable for both the long distance telephone
market and the moderate distance market.  Although both manufacture  gel-filled,
loose tube  cables,  a  significant  portion of Lucent  Technologies  and Siecor
Corp.'s fiber optic cable sales are tight-buffered fiber optic cable products in
the moderate distance market. Also, Coming and Lucent Technologies are principal
suppliers of optical  fiber  worldwide.  The  Company's  competitors,  including
Siecor  Corp.  and Lucent  Technologies,  are more  established,  having a large
business  base in the long  distance  telephone,  gel-filled,  loose  tube cable
market.  Those  companies can benefit from greater market  recognition  and have
greater financial, research and development,  production and marketing resources
than the Company.

    Additionally, fiber optic cable competes with copper wire cable on the basis
of cost and performance  tradeoffs.  The cost of the electro-optical  interfaces
required  for  fiber  optic  systems  and  higher  speed  electronics  generally
associated with high performance fiber optic systems can make them uncompetitive
in  applications  where the advantages of optical fiber are not required.  Fiber
optic cable also competes with other  alternative  transmission  media including
wireless and satellite communications.






                                       11
<PAGE>

  The Company believes that it competes  successfully  against its competitors
on the basis of breadth of product features,  quality,  ability to meet delivery
schedules,  technical support and service,  breadth of distribution channels and
price. Maintaining such competitive advantages will require continued investment
by the  Company in product  development,  sales and  marketing.  There can be no
assurance  that  the  Company  will  have  sufficient  resources  to  make  such
investments or that the Company will be able to make the technological  advances
necessary to maintain its competitive position. An increase in competition could
have a material adverse effect on the Company's  business and operating  results
because of price reductions and loss of market share. Competition could increase
if new  companies  enter the  market or if  existing  competitors  expand  their
product lines.

EMPLOYEES

As of October 31, 1999, the Company  employed a total of 140 persons,  including
30  in  sales,  marketing  and  customer  service,  12 in  engineering,  product
development  and quality  control,  84 in  manufacturing,  and 14 in finance and
administration. None of the Company's employees is represented by a labor union.
The Company has experienced no work stoppage and believes its employee relations
are excellent.

ITEM 2. PROPERTIES

    The  Company's  principal  administration,   marketing,  manufacturing,  and
product  development  facilities  are located in a 148,000  square foot building
located  adjacent to the Roanoke,  Virginia  airport and major trucking  company
facilitates.  The Company  believes that its  production  equipment is presently
operating at approximately 50% of its capacity.

ITEM 3. LEGAL PROCEEDINGS

    In the opinion of the Company's  management,  there are no legal proceedings
pending  to which the  Company is a party or to which any of its  properties  is
subject,  other than  ordinary,  routine  litigation  incidental to the business
which is not  expected  to have a  material  adverse  effect on the  results  of
operations, financial condition or cash flows of the Company.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

    There  were no issues or matters  submitted  to a vote of  security  holders
during the fourth quarter of the fiscal year ended October 31, 1999.


                                       12
<PAGE>


                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

    The Company's Common Stock is traded on the Nasdaq National Market under the
symbol "OCCF".  The following table sets forth for the fiscal periods  indicated
the high and low sales  prices of the Common  Stock,  as  reported on the Nasdaq
National  Market,  during the two most recent fiscal years. On January 14, 2000,
the Company's Common Stock closed at a price of $17.375 per share.

<TABLE>
<CAPTION>

    FISCAL YEAR ENDED OCTOBER 31, 1999                                          HIGH                      LOW
    ----------------------------------                                          ----                      ---

<S>                                                                            <C>                        <C>
    First Quarter (November 1, 1998 to January 31, 1999)                       $ 17.000                   $10.250

    Second Quarter (February 1 to April 30, 1999)                                13.500                     8.500

    Third Quarter (May 1 to July 31, 1999)                                       13.000                    10.125

    Fourth Quarter (August 1 to October 31, 1999)                                12.500                     9.125


     FISCAL YEAR ENDED OCTOBER 31, 1998
     ----------------------------------


     First Quarter (November 1, 1997 to January 31, 1998)                       $12.125                   $  8.125


     Second Quarter (February 1 to April 30, 1998)                               13.500                      9.000


     Third Quarter (May 1 to July 31, 1998)                                      11.250                      8.500


     Fourth Quarter (August 1 to October 31, 1998)                               12.750                      6.500


</TABLE>

    As of January 14, 2000,  there were an estimated  2,700 holders of record of
the Common Stock.

    The Company has not paid or declared any cash  dividends on its common stock
since the completion of its initial public offering in 1996.  While there are no
restrictions on the payment of dividends, the Company does not anticipate paying
any cash dividends on its common stock in the foreseeable future.


                                       13
<PAGE>




ITEM 6. SELECTED FINANCIAL DATA

                            OPTICAL CABLE CORPORATION
                             SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>


                                                                     YEARS ENDED OCTOBER 31,
                                                   ----------------------------------------------------------------
                                                   1999           1998           1997           1996           1995
                                                   ----           ----           ----           ----           ----
                                                              (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                             <C>             <C>         <C>            <C>           <C>
STATEMENT OF INCOME DATA:
    Net sales                                   $    50,699     $   50,589  $   52,189     $   45,152    $    36,360
    Cost of goods sold                               27,547         29,330      30,613         24,907         20,121
                                                     ------         ------      ------         ------         ------
       Gross profit                                  23,152         21,259      21,576         20,245         16,239
    Total operating expenses                         10,799          9,939       9,572          8,416          7,660
                                                     ------         ------      ------         ------         ------
       Income from operations                        12,353         11,320      12,004         11,829          8,579
    Other income (expense), net                         166             57         (47)           198           (379)
                                                     ------         ------      ------         ------         ------
       Income before income tax expense              12,519         11,377      11,957         12,027          8,200
    Income tax expense (1)                            4,214          4,107       4,150          2,806             --
                                                     ------         ------      ------         ------         ------
       Net income                               $     8,305     $    7,270  $    7,807     $    9,221    $     8,200
                                                     ======         ======      ======         =======        ======
    Pro forma Income Data (1):
       Net income before pro forma income
          tax provision, as reported                                                       $    9,221
       Pro forma income tax provision                                                           1,747
                                                                                               ------
       Pro forma net income                                                                $    7,474
                                                                                                =====
    Net income per common share
       (pro forma for 1996)                     $     0.220     $    0.190  $    0.202     $    0.190
                                                     ======         ======      ======         =======
    Net income per common share -
       assuming dilution (pro forma for 1996)   $     0.219     $    0.188  $    0.200     $    0.189
                                                     ======         ======      ======         =======
BALANCE SHEET DATA:
    Working capital                             $    21,980     $   18,991  $   19,912     $   14,377    $     9,076
    Total assets                                     37,512         32,829      35,214         31,127         18,819
    Total stockholders' equity                       32,847         29,991      31,379         23,572         14,952

</TABLE>

----------------------


(1)    Through March 31, 1996,  the Company was not subject to federal and state
       income  taxes since it had  elected,  under  provisions  of the  Internal
       Revenue  Code,  to be taxed as an S  Corporation.  On April 1, 1996,  the
       Company  completed a public offering of 2,675,416 shares of the Company's
       common stock from which it received net  proceeds of  approximately  $5.5
       million.  In connection with the closing of the Company's  initial public
       offering  on April 1, 1996,  the  Company  terminated  its status as an S
       Corporation  effective  March 31, 1996 and became  subject to federal and
       state income  taxes.  Accordingly,  the  statement of income data for the
       year ended October 31, 1996 includes income taxes from April 1, 1996, and
       for  informational  purposes,  the  statement of income data for the year
       ended October 31, 1996 includes a pro forma  adjustment  for income taxes
       which would have been  recorded if the Company had been subject to income
       taxes for the entire fiscal year presented.





                                       14
<PAGE>


ITEM 7. MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF  RESULTS OF  OPERATIONS  AND
        FINANCIAL CONDITION

                            OPTICAL CABLE CORPORATION
                 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
                      OF OPERATIONS AND FINANCIAL CONDITION



FORWARD-LOOKING INFORMATION

This report may contain certain "forward-looking" information within the meaning
of the federal  securities  laws. The  forward-looking  information may include,
among other information, (i) statements concerning the Company's outlook for the
future, (ii) statements of belief, (iii) future plans, strategies or anticipated
events, and (iv) similar information and statements  concerning matters that are
not historical facts. Such  forward-looking  information is subject to risks and
uncertainties  that may  cause  actual  events  to  differ  materially  from the
expectations  of the  Company.  Factors that could cause or  contribute  to such
differences  include,  but are  not  limited  to,  the  level  of  sales  to key
customers,  actions by  competitors,  fluctuations in the price of raw materials
(including  optical fiber), the Company's  dependence on a single  manufacturing
facility,  the ability of the Company to protect its  proprietary  manufacturing
technology,   the  Company's  dependence  on  a  limited  number  of  suppliers,
technological  changes and introductions of new competing  products,  changes in
market demand,  and market and economic  conditions in the areas of the world in
which the Company operates and markets its products.


RESULTS OF OPERATIONS

Net Sales

Net sales  consists  of gross sales of  products,  less  discounts,  refunds and
returns.  Net sales increased to $50.7 million in fiscal 1999 from $50.6 million
in fiscal 1998.  This slight  increase  was  primarily  attributable  to reduced
selling  price and a change in product mix.  Total cable meters  shipped  during
fiscal 1999  increased  7.5 percent to 168.2  million from 156.5  million  cable
meters  shipped  for the same  period in 1998.  This  increase  in cable  meters
shipped  was a result of a  3.3  million  increase  in  multimode  cable  meters
shipped  and an  8.4  million  increase  in single-mode  cable  meters  shipped.
Multimode cable generally has a higher selling price than single mode cable.

Net sales  decreased  3.1  percent to $50.6  million  in fiscal  1998 from $52.2
million for fiscal 1997. This decrease was primarily attributable to reduced raw
fiber prices  resulting in some downward  pressure on selling  prices as well as
reduced  demand  in the Far and  Middle  East as a result of  volatile  economic
conditions in those regions. In addition, weather conditions and delays in large
projects,  as  well as a  reallocation  of  capital  spending  by the  Company's
customers  away from  communications  expenditures  towards  Year 2000  projects
contributed to the decrease.

Management  believes that the Company's  business will grow as the global market
for  fiber  optic  cable  used  for  moderate  distance   applications  expands.
Management  anticipates that new electronic  communication devices will continue
to  become  more  reliant  on  fiber  optic   technology  to  achieve   improved
performance. Additionally, the Company expects new markets for fiber optic cable
to emerge as fiber optic sensors are developed for production plant  automation,
smart  highways,  security  applications,   and  other  specialty  applications.
Management believes the Company's unique technological  background and specialty
market  expertise  should  assist  the  Company  in  capturing  its share of any
increase in the global  market for fiber optic cable used for moderate  distance
applications  and  contribute  to future  earnings  growth for the Company.  The
Company also intends to use its existing product line to make inroads into other
markets   such   as   moderate    distance    applications    for    single-mode
telecommunications and cable television.



                                       15
<PAGE>


                            OPTICAL CABLE CORPORATION
                 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
                OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED)

Gross Profit Margin

Cost of goods sold  consists of the cost of  materials,  compensation  costs and
overhead related to the Company's manufacturing operations.  The Company's gross
profit  margin  (gross  profit as a percentage  of net sales)  increased to 45.7
percent in fiscal 1999 from 42.0 percent in fiscal 1998.  This  increase was due
to reduced raw fiber prices  partially offset by an increase in the ratio of net
sales attributable to the Company's  distributors  during the period as compared
to total net sales.  During fiscal 1999, net sales to distributors  approximated
63 percent  versus 62 percent for the same period in 1998.  During  fiscal 1999,
sales from orders $50,000 or more approximated 15 percent compared to 18 percent
for fiscal  1998.  Discounts on large  orders and on sales to  distributors  are
generally greater than for sales to the rest of the Company's customer base.

The Company's gross profit margin  increased to 42.0 percent in fiscal 1998 from
41.3 percent in fiscal 1997.  This slight  increase was due to reduced raw fiber
prices,  partially  offset by some downward  pressure on selling prices,  by the
impact of the  increase  in the ratio of large  orders and the  increase  in the
ratio of net sales attributable to the Company's  distributors  during the year.
During fiscal 1998, sales from orders $50,000 or more approximated 18 percent of
net sales compared to 20 percent for fiscal 1997. In addition,  for fiscal 1998,
net sales to distributors approximated 62 percent of net sales versus 57 percent
for fiscal 1997.

Selling, General and Administrative Expenses

Selling,  general and administrative  expenses consist of the compensation costs
(including  sales  commissions)  for  sales  and  marketing  personnel,   travel
expenses,  customer  support  expenses,  trade show expenses,  advertising,  the
compensation cost for administration,  finance and general management personnel,
as well as legal  and  accounting  fees.  Selling,  general  and  administrative
expenses as a percentage  of net sales were 21.3 percent in fiscal 1999 compared
to 19.6 percent in fiscal 1998.  This higher  percentage  reflects the fact that
net sales for fiscal 1999 were comparable to fiscal 1998, while selling, general
and administrative  expenses  increased 8.6 percent,  due primarily to increased
marketing efforts.

Selling,  general and administrative  expenses as a percentage of net sales were
19.6 percent in fiscal 1998 compared to 18.3 percent in fiscal 1997. This higher
percentage  was  primarily the result of the fact that net sales for fiscal 1998
decreased  while  selling,  general and  administrative  expenses  increased 3.8
percent   compared  to  fiscal   1997.   The  ratio  of  selling,   general  and
administrative  expenses as a percentage  of net sales was also  impacted due to
incurring  approximately  $130,000 of expenses to develop and  distribute  a new
catalog during fiscal 1998 in an effort to improve international sales.

Income Before Income Tax Expense

Income before income tax expense of $12.5 million in fiscal 1999  increased $1.1
million compared to fiscal 1998. This 10.0 percent increase was primarily due to
the increase in gross profit margin  offset by the increase in selling,  general
and administrative expenses.

Income  before  income tax  expense of $11.3  million in fiscal  1998  decreased
$579,000  compared to fiscal 1997.  This decrease was primarily due to decreased
sales volume and decreasing  sales prices resulting from reduced raw fiber costs
offset by the slight increase in gross profit margin.



                                       16
<PAGE>

                           OPTICAL CABLE CORPORATION
                 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
                OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED)

Income Tax Expense

The  statements  of income for the years ended  October 31, 1999,  1998 and 1997
include income tax expense at effective tax rates of 33.7 percent,  36.1 percent
and 34.7 percent,  respectively.  Fluctuations  in the  Company's  effective tax
rates are due  primarily to the amount and timing of the tax benefit  related to
the Company's foreign sales corporation.

Net Income

Net income for fiscal 1999 was $8.3 million  compared to $7.3 million for fiscal
1998.  Net income  increased  $1.0  million due to the  increase in gross profit
margin offset by the increase in selling,  general and  administrative  expenses
and the $107,000 increase in income tax expense.

Net income for fiscal 1998 was $7.3 million  compared to $7.8 million for fiscal
1997. Net income decreased  $537,000 due primarily to decreased sales volume and
decreasing  sales  prices  resulting  from reduced raw fiber costs offset by the
slight increase in gross profit margin.


FINANCIAL CONDITION

Total  assets at  October  31,  1999 were $37.5  million,  an  increase  of $4.7
million,  or 14.3 percent from October 31, 1998. This increase was primarily due
to an  increase  of $5.7  million  in  cash  and  cash  equivalents,  offset  by
management's continued efforts to decrease inventories, which resulted in a $1.2
million reduction in inventories.

Total  stockholders'  equity at October 31, 1999 increased $2.9 million,  or 9.5
percent from October 31, 1998.  This  increase was  primarily  due to net income
retained,  offset  by  the  repurchase  of  approximately  $5.9  million  of the
Company's common stock.


LIQUIDITY AND CAPITAL RESOURCES

The  Company's  primary  capital  needs  have been to (i) fund  working  capital
requirements, (ii) repay indebtedness, (iii) purchase property and equipment for
expansion,  (iv) repurchase its common stock and (v) fund  distributions  to its
previously sole stockholder  primarily to satisfy his tax liabilities  resulting
from the Company's S Corporation  status,  which was terminated  March 31, 1996.
The Company's primary sources of financing have been cash from operations,  bank
borrowings and proceeds from the initial public offering of the Company's common
stock.  The Company  believes that its cash flow from  operations  and available
lines of credit will be adequate  to fund its  operations  for at least the next
twelve months.

Under a loan  agreement with its bank dated March 10, 1999, the Company has a $5
million  secured  revolving  line of credit and a $10  million  secured  line of
credit.  The  Company's  intention  is that the $5  million  line of  credit  be
available  to fund general  corporate  purposes and that the $10 million line of
credit be available to fund potential acquisitions and joint ventures. The lines
of credit bear interest at 1.50 percent above the monthly LIBOR rate



                                       17
<PAGE>

                           OPTICAL CABLE CORPORATION
                 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
                OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED)

and are  equally  and  ratably  secured by the  Company's  accounts  receivable,
contract rights, inventory,  furniture and fixtures, machinery and equipment and
general  intangibles.  The lines of credit  will expire on  February  28,  2001,
unless renewed or extended. As of the date hereof, the Company has no additional
material sources of financing.

Cash flows from operations were  approximately  $11.9 million,  $9.6 million and
$4.0  million  in fiscal  1999,  1998 and 1997  respectively.  Cash  flows  from
operations  in fiscal  1999 were  primarily  provided  by  operating  income,  a
decrease in inventory  of $1.2  million and an increase in accounts  payable and
accrued expenses of $1.3 million. Cash flows from operations in fiscal 1998 were
primarily  provided  by  operating  income and a decrease in  inventory  of $2.1
million.  In 1998,  the Company  reduced its  inventory of optical  fiber due to
anticipated  continued  reductions  in raw fiber prices.  For fiscal 1997,  cash
flows from operations were primarily provided by operating income,  offset by an
increase in trade accounts  receivable of $552,000,  an increase in inventory of
$1.8  million and a decrease in  accounts  payable and accrued  expenses of $2.3
million.

Net cash used in investing  activities  in fiscal 1999 totaled  $553,000 and was
primarily for  expenditures  related to facilities and equipment of $401,000 and
increase in cash surrender value of life insurance of $171,000. Net cash used in
investing  activities  in fiscal 1998 and 1997 was  primarily  for  expenditures
related  to  facilities  and  equipment  and  was  $622,000  and  $3.6  million,
respectively.  The  Company's  expansion  of  its  headquarters  facilities  was
completed in fiscal 1997.

Net cash used in financing  activities  was $5.7 million,  $8.8 million and $1.1
million  in  fiscal  1999,  1998 and  1997,  respectively.  The net cash used in
financing  activities in fiscal 1999 consisted of the repurchase of common stock
in the amount of $5.9 million,  offset by proceeds received from the exercise of
employee stock options of $200,000. The net cash used in financing activities in
fiscal  1998  consisted  of a  repurchase  of common  stock in the  amount of $9
million, offset by proceeds received from the exercise of employee stock options
of $198,000.  The net cash used in financing activities in fiscal 1997 consisted
of repayment of debt  outstanding  under the  Company's  lines of credit of $1.1
million.

The Company's  Board of Directors  has  authorized  the  repurchase of up to $20
million  of the  Company's  common  stock in the  open  market  or in  privately
negotiated  transactions.  Through October 31, 1999, the Company has repurchased
approximately  $14.9 million of its common stock in such transactions  since the
inception  of the  Company's  share  repurchase  program  in October  1997.  The
repurchases were funded through cash flows from operations.  The Company intends
to use excess  working  capital and other sources as  appropriate to finance the
remaining share repurchase program.


DERIVATIVES

The Company does not use derivatives or off-balance  sheet  instruments  such as
future contracts, forward obligations, interest rate swaps, or options.


                                       18
<PAGE>

                           OPTICAL CABLE CORPORATION
                 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
                OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED)

YEAR 2000

The "Year 2000" issue will affect many  computers and other  electronic  devices
that are not  programmed  to  properly  recognize  a year that  begins with "20"
instead of "19." Some devices may recognize dates on or after January 1, 2000 as
a date during the 1900s, or may not recognize the date at all. If not corrected,
many devices could fail or create erroneous results.

Since 1997, the Company has been actively assessing,  planning and responding to
the risks to the Company created by the Year 2000 issue. In assessing the risks,
the Company has focused on both (i) its internal  information  technology ("IT")
and non-IT  systems,  including,  but not  limited  to,  computer  hardware  and
software,  manufacturing  equipment,  printers,  facsimile  machines,  and other
control and accounting devices,  and (ii) its interfaces with third parties with
which the Company has material relationships,  such as suppliers,  customers and
financial institutions.

The Company has completed its assessment  and response  planning with respect to
its internal IT and non-IT systems.  Additionally, the Company has substantially
completed  its  planned  remediation  measures  with  respect to those  internal
systems.  The  Company's  remediation  has included  updating  various  computer
hardware and software  and printers to be Year 2000  compliant.  The Company has
also determined that the Year 2000 issue will not have a material adverse affect
on its  manufacturing  machinery.  To date,  the Company has expended  less than
$100,000 on its remediation measures and believes substantial future remediation
expenditures  with respect to its internal  systems will not be necessary.  With
respect to the Company's internal systems, the Company has completed its planned
remediation  and  testing  and  believes  the Year  2000  issue  will not have a
material  adverse  affect on the Company or its  business.  The Company does not
believe contingency plans are necessary for its internal systems at this time.

The Company has completed its assessment of potential Year 2000 issues which may
arise from failures of third parties to be Year 2000 compliant. However, many of
the Company's  suppliers and customers are still engaged in executing their Year
2000 readiness  efforts and, as a result,  the Company cannot fully evaluate the
Year 2000 risks to its supply chain and its distribution  channels at this time.
The Company's assessment efforts included sending  questionnaires to major third
party suppliers and reviewing responses,  and taking other steps to assess risks
as deemed appropriate.

The  Company  has not been made aware of any Year 2000  issues of third  parties
that are  expected to be  unresolved  prior to December  31, 1999 and that would
have a material  adverse  effect on the  Company.  Nonetheless,  the  Company is
considering contingency plans, as appropriate, including relying on raw material
inventory on hand and identification of alternative suppliers.  The Company will
continue  to monitor  the Year 2000  status of third  parties  with which it has
material  relationships to minimize its risk from failures of such parties to be
Year 2000 compliant.

The most likely  worst case  scenario  for the Company  with respect to the Year
2000 issue is the failure of a supplier,  including  an energy  supplier,  to be
Year 2000 compliant  such that its supply of needed  products or services to the
Company's manufacturing facility is interrupted  temporarily.  This could result
in the Company not being able to produce fiber optic cable for a period of time,
which in turn could result in lost sales and gross profit.


                                       19
<PAGE>

                           OPTICAL CABLE CORPORATION
                 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
                OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED)

While the Company  believes that it is taking the necessary steps to resolve its
Year 2000 issues in a timely manner,  there can be no assurance that the Company
will not have any Year 2000 problems.  If any such problems  occur,  the Company
will work to solve them as quickly as possible. At present, the Company does not
expect  that such  problems  related  to the  Company's  internal  IT and non-IT
systems  will have a  material  adverse  affect on its  business.  The  failure,
however, of one or more of the Company's major suppliers, customers or financial
institutions to be Year 2000 compliant  could have a material  adverse effect on
the Company.


NEW ACCOUNTING STANDARDS

In June 1997,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial  Accounting  Standards ("SFAS") No. 131, Disclosures about Segments of
an Enterprise and Related  Information.  SFAS No. 131 establishes  standards for
the way public business  enterprises are to report  information  about operating
segments in annual financial statements and requires those enterprises to report
selected  information about operating segments in interim financial reports.  It
also establishes  standards for related disclosures about products and services,
geographic areas and major customers.

SFAS No. 131 is effective for financial  statements for periods  beginning after
December 15, 1997. In the initial year of application,  comparative  information
for earlier years is to be restated,  unless it is  impracticable to do so. SFAS
No. 131 need not be applied to interim financial  statements in the initial year
of its  application,  but  comparative  information  for interim  periods in the
initial  year of  application  shall be reported  in  financial  statements  for
interim periods in the second year of application.  The Company adopted SFAS No.
131 as of November 1, 1998.

The Company has a single  reportable  segment for purposes of segment  reporting
pursuant to SFAS No. 131. In addition,  the Company's fiber optic cable products
are similar in nature.  Therefore,  the Company  has  disclosed  enterprise-wide
information  about  geographic  areas  and major  customers  in the notes to the
financial  statements in accordance  with the  provisions of SFAS No. 131. Prior
years'  corresponding   information  has  been  restated  to  conform  with  the
requirements of SFAS No. 131.

As of October 31, 1999, there are no new accounting  standards  issued,  but not
yet adopted by the Company, which are expected to be applicable to the Company's
financial position, operating results or financial statement disclosures.


                                       20
<PAGE>


ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

    The  Company  does  not  engage  in  derivative  financial   instruments  or
derivative  commodity  instruments.  As  of  October  31,  1999,  the  Company's
financial instruments are not exposed to significant market risk due to interest
rate risk, foreign currency exchange risk or commodity price risk.


                                       21
<PAGE>


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                            OPTICAL CABLE CORPORATION
                                    INDEX TO
                              FINANCIAL STATEMENTS
                        AND FINANCIAL STATEMENT SCHEDULES


<TABLE>
<CAPTION>


FINANCIAL STATEMENTS:

                                                                                                       PAGE
                                                                                                       ----
<S>                                                                                                     <C>
Independent Auditors' Report ...................................................................         23

Balance Sheets as of October 31, 1999 and 1998..................................................         24

Statements of Income for the Years Ended October 31, 1999, 1998 and 1997........................         25

Statements of Stockholders' Equity for the Years Ended October 31, 1999, 1998 and 1997..........         26

Statements of Cash Flows for the Years Ended October 31, 1999, 1998 and 1997....................         27

Notes to Financial Statements...................................................................         28

</TABLE>

FINANCIAL STATEMENT SCHEDULES:

No financial statement schedules have been included since they are not required,
not  applicable,  or the  information  is  otherwise  included in the  financial
statements of the Company.

                                       22

<PAGE>



                          INDEPENDENT AUDITORS' REPORT


The Board of Directors and Stockholders
Optical Cable Corporation:


We have audited the accompanying  balance sheets of Optical Cable Corporation as
of  October  31,  1999  and  1998,   and  the  related   statements  of  income,
stockholders'  equity,  and cash  flows for each of the years in the  three-year
period ended October 31, 1999. These financial statements are the responsibility
of the  Company's  management.  Our  responsibility  is to express an opinion on
these financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the financial position of Optical Cable Corporation as of
October 31, 1999 and 1998,  and the results of its operations and its cash flows
for each of the years in the  three-year  period  ended  October  31,  1999,  in
conformity with generally accepted accounting principles.


                                                KPMG LLP

Roanoke, Virginia
December 10, 1999



                                       23
<PAGE>





                            OPTICAL CABLE CORPORATION
                                 BALANCE SHEETS
                            OCTOBER 31, 1999 AND 1998

<TABLE>
<CAPTION>

                                                                                             OCTOBER 31,
                                                                                       -----------------------
                                       ASSETS                                          1999               1998
                                                                                       ----               ----
<S>                                                                             <C>                 <C>
Current assets:
    Cash and cash equivalents                                                     $   6,816,678      $   1,122,277
    Trade accounts receivable, net of allowance for doubtful
       accounts of $316,000 in 1999 and $311,500 in 1998                             10,230,717         10,012,699
    Other receivables                                                                   280,219            295,199
    Due from employees                                                                    8,100              5,589
    Note receivable                                                                      61,100                 --
    Inventories                                                                       8,754,423          9,967,012
    Prepaid expenses                                                                    106,536             95,766
    Deferred income taxes                                                               206,652            212,738
                                                                                     ----------         ----------
                   Total current assets                                              26,464,425         21,711,280
Note receivable, noncurrent                                                              32,505                 --
Other assets, net                                                                       188,328             33,950
Property and equipment, net                                                          10,826,331         11,083,921
                                                                                     ----------         ----------
                   Total assets                                                   $  37,511,589      $  32,829,151
                                                                                     ==========         ==========
                        LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
    Accounts payable and accrued expenses                                         $   3,370,244      $   1,952,360
    Accrued compensation and payroll taxes                                              692,678            656,028
    Income taxes payable                                                                421,803            111,449
                                                                                     ----------         ----------
                   Total current liabilities                                          4,484,725          2,719,837

Deferred income taxes                                                                   179,789            118,121
                                                                                     ----------         ----------
                   Total liabilities                                                  4,664,514          2,837,958
                                                                                     ----------         ----------
Stockholders' equity:
    Preferred stock, no par value, authorized 1,000,000 shares;
       none issued and outstanding                                                           --                 --
    Common stock, no par value, authorized 100,000,000
       shares; issued and outstanding 37,414,271 shares in 1999
       and 37,879,036 shares in 1998                                                  4,128,316          9,786,281
    Paid-in capital                                                                     359,566            150,359
    Retained earnings                                                                28,359,193         20,054,553
                                                                                     ----------         ----------
                   Total stockholders' equity                                        32,847,075         29,991,193
Commitments and contingencies
                                                                                     ----------         ----------
                   Total liabilities and stockholders' equity                     $  37,511,589      $  32,829,151
                                                                                     ==========         ==========

See accompanying notes to financial statements.

</TABLE>


                                       24
<PAGE>



                            OPTICAL CABLE CORPORATION
                              STATEMENTS OF INCOME
                   YEARS ENDED OCTOBER 31, 1999, 1998 AND 1997

<TABLE>
<CAPTION>

                                                                                         YEARS ENDED OCTOBER 31,
                                                                           --------------------------------------------------------
                                                                               1999                 1998                 1997
                                                                           ------------          ------------          ------------
<S>                                                                        <C>                   <C>                   <C>
Net sales                                                                  $ 50,698,637          $ 50,588,893          $ 52,188,850
Cost of goods sold                                                           27,547,022            29,329,822            30,612,690
                                                                             ----------            ----------            ----------
                   Gross profit                                              23,151,615            21,259,071            21,576,160
Selling, general and administrative expenses                                 10,798,643             9,939,258             9,572,061
                                                                             ----------            ----------            ----------
                   Income from operations                                    12,352,972            11,319,813            12,004,099
Other income (expense):
    Interest income                                                             201,708                56,260                15,351
    Interest expense                                                                 --                  (505)              (17,930)
    Other, net                                                                  (35,944)                1,891               (44,580)
                                                                             ----------            ----------            ----------
                   Other income (expense), net                                  165,764                57,646               (47,159)
                                                                             ----------            ----------            ----------
                   Income before income tax expense                          12,518,736            11,377,459            11,956,940
Income tax expense                                                            4,214,096             4,107,495             4,149,794
                                                                             ----------            ----------            ----------
                   Net income                                              $  8,304,640          $  7,269,964          $  7,807,146
                                                                           ============          ============          ============
Net income per share:
    Net income per common share                                            $      0.220          $      0.190          $      0.202
                                                                           ============          ============          ============
    Net income per common share - assuming
       dilution                                                            $      0.219          $      0.188          $      0.200
                                                                           ============          ============          ============

</TABLE>

See accompanying notes to financial statements.


                                       25
<PAGE>

                            OPTICAL CABLE CORPORATION
                       STATEMENTS OF STOCKHOLDERS' EQUITY
                   YEARS ENDED OCTOBER 31, 1999, 1998 AND 1997

<TABLE>
<CAPTION>


                                                                  COMMON STOCK                                           TOTAL
                                                             ----------------------          PAID-IN       RETAINED   STOCKHOLDERS'
                                                             SHARES          AMOUNT          CAPITAL       EARNINGS      EQUITY
                                                             ------          ------          -------       --------      ------
<S>                                                        <C>            <C>             <C>          <C>            <C>

Balances at October 31, 1996                                38,675,416     $ 18,594,116     $     --    $ 4,977,443    $ 23,571,559
Net income                                                          --               --           --      7,807,146       7,807,146
                                                            ----------       ----------     --------     ----------      ----------
Balances at October 31, 1997                                38,675,416       18,594,116           --     12,784,589      31,378,705

Exercise of employee stock
    options ($2.50 per share)                                   79,350          198,375           --             --         198,375
Tax benefit of disqualifying
    disposition of stock options
    exercised                                                       --               --      150,359             --         150,359
Repurchase of common stock
    (at cost)                                                 (875,730)      (9,006,210)          --             --      (9,006,210)
Net income                                                          --               --           --      7,269,964       7,269,964
                                                            ----------       ----------     --------     ----------      ----------
Balances at October 31, 1998                                37,879,036        9,786,281      150,359     20,054,553      29,991,193
Exercise of employee stock
    options ($2.50 per share)                                   79,800          199,500           --             --         199,500
Tax benefit of disqualifying
    disposition of stock options
    exercised                                                       --               --      209,207             --         209,207
Repurchase of common stock
    (at cost)                                                 (544,565)      (5,857,465)          --             --      (5,857,465)
Net income                                                          --               --           --      8,304,640       8,304,640
                                                            ----------       ----------     --------     ----------      ----------
Balances at October 31, 1999                                37,414,271     $  4,128,316     $359,566    $28,359,193    $ 32,847,075
                                                            ==========       ==========     ========     ==========      ===========

</TABLE>

See accompanying notes to financial statements.


                                       26
<PAGE>


                            OPTICAL CABLE CORPORATION
                            STATEMENTS OF CASH FLOWS
                   YEARS ENDED OCTOBER 31, 1999, 1998 AND 1997

<TABLE>
<CAPTION>

                                                                                               YEARS ENDED OCTOBER 31,
                                                                                     -------------------------------------------
                                                                                      1999               1998               1997
                                                                                      ----               ----               ----
<S>                                                                              <C>                 <C>                <C>
Cash flows from operating activities:
    Net income                                                                   $  8,304,640        $ 7,269,964        $ 7,807,146
    Adjustments to reconcile net income to net cash
       provided by operating activities:
          Depreciation and amortization                                               764,652            787,674            706,076
          Bad debt expense (recovery)                                                  87,490             88,005            (10,778)
          Deferred income tax expense (benefit)                                        67,754            (77,515)            88,975
          Loss on disposal of property and equipment                                       --              2,669                 --
          (Increase) decrease in:
            Trade accounts receivable                                                (417,913)          (169,428)          (552,022)
            Other receivables                                                          14,980            244,903           (186,061)
            Due from employees                                                         (2,511)            (2,055)            (2,059)
            Inventories                                                             1,212,589          2,052,431         (1,758,006)
            Prepaid expenses                                                          (10,770)            25,280            (56,183)
            Other assets                                                                   --                 --                 39
          Increase (decrease) in:
            Accounts payable and accrued expenses                                   1,328,540           (395,330)        (2,260,416)
            Accrued compensation and payroll taxes                                     36,650             43,292            (63,989)
            Income taxes payable                                                      519,561           (303,191)           327,073
                                                                                   ----------          ---------          ---------
                   Net cash provided by operating activities                       11,905,662          9,566,699          4,039,795
                                                                                   ----------          ---------          ---------
Cash flows from investing activities:
    Purchase of property and equipment                                               (400,714)          (622,394)        (3,628,727)
    Cash surrender value of life insurance                                           (171,382)                --                 --
    Collection from note receivable                                                    18,800                 --                 --
                                                                                   ----------          ---------          ---------
                   Net cash used in investing activities                             (553,296)          (622,394)        (3,628,727)
                                                                                   ----------          ---------          ---------
Cash flows from financing activities:
    Net payments on notes payable                                                          --                 --         (1,103,000)
    Repurchase of common stock                                                     (5,857,465)        (9,006,210)                --
    Proceeds from exercise of employee stock options                                  199,500            198,375                 --
                                                                                   ----------          ---------          ---------
                   Net cash used in financing activities                           (5,657,965)        (8,807,835)        (1,103,000)
                                                                                   ----------          ---------          ---------
                   Net increase (decrease) in cash and cash
                     equivalents                                                    5,694,401            136,470           (691,932)
Cash and cash equivalents at beginning of year                                      1,122,277            985,807          1,677,739
                                                                                   ----------          ---------          ---------
Cash and cash equivalents at end of year                                         $  6,816,678        $ 1,122,277        $   985,807
                                                                                   ==========          =========          =========
Supplemental Disclosure of Cash Flow Information:
    Cash payments for interest                                                   $         --        $       505        $    17,930
                                                                                   ==========          =========          =========
    Income taxes paid                                                            $  3,615,300        $ 4,488,201        $ 3,733,746
                                                                                   ==========          =========          =========
    Noncash investing and financing activities:
       Capital expenditures accrued in accounts payable                          $     89,344        $        --        $   245,566
                                                                                   ==========          =========          =========
       Income tax benefit from exercise of stock options                         $    209,207        $   150,359        $        --
                                                                                   ==========          =========          =========
       Trade accounts receivable financed as note receivable                     $    112,405        $        --        $        --
                                                                                   ==========          =========          =========
</TABLE>


See accompanying notes to financial statements.


                                       27
<PAGE>



                           OPTICAL CABLE CORPORATION
                         Notes to Financial Statements
                  Years Ended October 31, 1999, 1998 and 1997




(1)    DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         (A)      DESCRIPTION OF BUSINESS

Optical Cable Corporation (the "Company") manufactures and markets a broad range
of fiber optic cables for "high bandwidth" transmission of data, video and audio
communications  over moderate  distances.  The Company's  fiber optic cables are
sold nationwide and in over 70 foreign countries (also see note 9).

         (B)      CASH EQUIVALENTS

At  October  31,  1999 and 1998,  cash  equivalents  consist of  $6,755,814  and
$998,018,  respectively,  of overnight  repurchase  agreements  and money market
mutual  funds.  For  purposes  of the  statements  of cash  flows,  the  Company
considers all highly liquid debt instruments  with original  maturities of three
months or less to be cash equivalents.

         (C)      INVENTORIES

Inventories of raw materials and production  supplies are stated at the lower of
cost (specific  identification  for optical  fibers and first-in,  first-out for
other raw materials and production  supplies) or market.  Inventories of work in
process  and  finished  goods are stated at average  cost,  which  includes  raw
materials, direct labor and manufacturing overhead.

         (D)      PROPERTY AND EQUIPMENT

Property and equipment are stated at cost.  Depreciation  and  amortization  are
provided for using both  straight-line  and declining  balance  methods over the
estimated  useful lives of the assets.  Estimated  useful lives are  thirty-nine
years for buildings and  improvements  and five to seven years for machinery and
equipment and furniture and fixtures.

         (E)      REVENUE RECOGNITION

Revenue  is  recognized  at the time of  product  shipment  or  delivery  to the
customer, based on shipping terms.

         (F)      INCOME TAXES

Income taxes are accounted for under the asset and  liability  method.  Deferred
tax assets  and  liabilities  are  recognized  for the  future tax  consequences
attributable to differences  between the financial statement carrying amounts of
existing  assets and  liabilities  and their  respective tax bases and operating
loss and tax credit  carryforwards.  Deferred  tax assets  and  liabilities  are
measured  using  enacted tax rates  expected  to apply to taxable  income in the
years in which those  temporary  differences  are  expected to be  recovered  or
settled.  The effect on deferred tax assets and  liabilities  of a change in tax
rates is recognized in income in the period that includes the enactment date.


                                       28
<PAGE>

                            OPTICAL CABLE CORPORATION
                    Notes to Financial Statements (Continued)
                   Years Ended October 31, 1999, 1998 and 1997



         (G)      IMPAIRMENT OF LONG-LIVED  ASSETS AND  LONG-LIVED  ASSETS TO BE
                  DISPOSED OF

The Company reviews long-lived assets and certain  identifiable  intangibles for
impairment  whenever  events  or  changes  in  circumstances  indicate  that the
carrying amount of an asset may not be recoverable.  Recoverability of assets to
be held and used is measured by a comparison of the carrying  amount of an asset
to future  undiscounted net cash flows expected to be generated by the asset. If
such assets are  considered to be impaired,  the  impairment to be recognized is
measured  by the amount by which the  carrying  amount of the assets  exceed the
fair value of the assets.  Assets to be disposed of are reported at the lower of
the carrying amount or fair value less costs to sell.

         (H)      STOCK OPTION PLAN

Prior to November 1, 1996,  the Company  accounted  for its stock option plan in
accordance  with the provisions of Accounting  Principles  Board ("APB") Opinion
No. 25, Accounting for Stock Issued to Employees,  and related  interpretations.
As such, compensation expense would be recorded on the date of grant only if the
current market price of the underlying  stock  exceeded the exercise  price.  On
November  1,  1996,  the  Company  adopted  Statement  of  Financial  Accounting
Standards  ("SFAS") No. 123,  Accounting  for  Stock-Based  Compensation,  which
permits  entities to recognize as expense over the vesting period the fair value
of all stock-based awards on the date of grant. Alternatively, SFAS No. 123 also
allows  entities to continue to apply the  provisions  of APB Opinion No. 25 and
provide pro forma net income and pro forma  earnings per share  disclosures  for
employee  stock  option  grants  made  in  1995  and  future  years  as  if  the
fair-value-based  method  defined in SFAS No. 123 had been applied.  The Company
has  elected to  continue  to apply the  provisions  of APB  Opinion  No. 25 and
provide the pro forma disclosure provisions of SFAS No. 123.

         (I)      NET INCOME PER SHARE

Effective  November 1, 1997,  the Company  adopted  SFAS No. 128,  Earnings  per
Share. SFAS No. 128 establishes  standards for computing and presenting earnings
per share  ("EPS") and applies to entities  with  publicly  held common stock or
potential common stock.

Basic EPS (net income per common  share)  excludes  dilution  and is computed by
dividing net income  available to common  stockholders  by the  weighted-average
number of common shares outstanding for the period.  Diluted EPS (net income per
common share - assuming  dilution)  reflects the  potential  dilution that could
occur if securities or other  contracts to issue common stock were  exercised or
converted  into common  stock or resulted in the  issuance of common  stock that
then shared in the net income of the entity.




                                       29
<PAGE>

                            OPTICAL CABLE CORPORATION
                    Notes to Financial Statements (Continued)
                   Years Ended October 31, 1999, 1998 and 1997

         (J)      COMPREHENSIVE INCOME

In June 1997,  the  Financial  Accounting  Standards  Board issued SFAS No. 130,
Reporting Comprehensive Income. SFAS No. 130 establishes standards for reporting
and  display  of  comprehensive  income  and  its  components  in a full  set of
financial  statements.  SFAS No.  130 was issued to  address  concerns  over the
practice of reporting elements of comprehensive  income directly in equity. This
Statement requires all items that are required to be recognized under accounting
standards  as  components  of  comprehensive  income be  reported in a financial
statement  that is  displayed  in  equal  prominence  with the  other  financial
statements.  It does not require a specific format for that financial  statement
but  requires  that  an  enterprise   display  an  amount   representing   total
comprehensive income for the period in that financial statement.

SFAS No. 130 is  applicable to all entities that provide a full set of financial
statements.  Enterprises that have no items of other comprehensive income in any
period presented are excluded from the scope of this Statement.  SFAS No. 130 is
effective for both interim and annual periods beginning after December 15, 1997.
Comparative financial statements provided for earlier periods are required to be
reclassified to reflect the provisions of this Statement.

The  adoption of SFAS No. 130 did not have any effect on current or prior period
financial  statement  displays presented by the Company since the Company has no
items of other comprehensive income in any period presented.

         (K)      USE OF ESTIMATES

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect the reported  amounts of assets and  liabilities  and the  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the  reported  amounts of revenues  and expenses  during the  reporting  period.
Actual results could differ from these estimates.


(2)    ALLOWANCE FOR DOUBTFUL ACCOUNTS RECEIVABLE

A summary of changes in the allowance for doubtful  accounts  receivable for the
years ended October 31, 1999, 1998 and 1997 follows:


<TABLE>
<CAPTION>


                                                      YEARS ENDED OCTOBER 31,
                                          --------------------------------------------------
                                              1999              1998              1997
                                          --------------    --------------   ---------------
<S>                                    <C>                <C>             <C>
Balance at beginning of year           $     311,500      $    307,400    $      300,000
Bad debt expense (recovery)                   87,490            88,005           (10,778)
Losses charged to allowance                  (84,633)          (90,147)          (26,592)
Recoveries added to allowance                  1,643             6,242            44,770
                                          --------------    --------------   ---------------
Balance at end of year                 $     316,000      $    311,500    $      307,400
                                          ==============    ==============   ===============


</TABLE>



                                       30
<PAGE>

                          OPTICAL CABLE CORPORATION
                    Notes to Financial Statements (Continued)
                   Years Ended October 31, 1999, 1998 and 1997


(3)    INVENTORIES

Inventories at October 31, 1999 and 1998 consist of the following:
<TABLE>
<CAPTION>


                                               OCTOBER 31,
                                    --------------------------------
                                         1999             1998
                                    ---------------   --------------
<S>                               <C>               <C>
Finished goods                    $     2,976,426   $      4,152,094
Work in process                         2,306,209          1,896,858
Raw materials                           3,416,046          3,873,824
Production supplies                        55,742             44,236
                                    ---------------   --------------
                                  $     8,754,423   $      9,967,012
                                    ===============   ==============
</TABLE>


(4)    PROPERTY AND EQUIPMENT

Property and equipment at October 31, 1999 and 1998 consists of the following:

<TABLE>
<CAPTION>

                                                                                             OCTOBER 31,
                                                                                 --------------------------------
                                                                                      1999             1998
                                                                                 ---------------   --------------
<S>                                                                            <C>               <C>
Land                                                                           $    2,745,327    $      2,745,327
Building and improvements                                                           6,893,642           6,888,444
Machinery and equipment                                                             5,424,594           5,007,050
Furniture and fixtures                                                                734,404             729,341
Construction in progress                                                              131,008              69,938
                                                                                 ---------------   --------------
                   Total property and equipment, at cost                           15,928,975          15,440,100
Less accumulated amortization and depreciation                                     (5,102,644)         (4,356,179)
                                                                                 ---------------   --------------
                   Property and equipment, net                                 $   10,826,331    $     11,083,921
                                                                                 ===============   ==============

</TABLE>


(5)     NOTES PAYABLE

Under a loan  agreement with its bank dated March 10, 1999, the Company has a $5
million  secured  revolving  line of credit and a $10  million  secured  line of
credit.  The  Company's  intention  is that the $5  million  line of  credit  be
available  to fund general  corporate  purposes and that the $10 million line of
credit be available to fund potential acquisitions and joint ventures. The lines
of credit bear  interest  at 1.50  percent  above the  monthly  LIBOR rate (6.41
percent as of October  31,  1999) and are  equally  and  ratably  secured by the
Company's  accounts  receivable,   contract  rights,  inventory,  furniture  and
fixtures,  machinery and equipment and general intangibles.  The lines of credit
will expire on February 28, 2001, unless renewed or extended. While the lines of
credit do not require a compensating  balance that legally  restricts the use of
cash  amounts,  at the bank's  request,  the  Company  has agreed to maintain an
unrestricted target cash balance of $125,000.


                                       31
<PAGE>

                          OPTICAL CABLE CORPORATION
                    Notes to Financial Statements (Continued)
                   Years Ended October 31, 1999, 1998 and 1997

(6)    LEASES

In August  1994,  the  Company  entered  into a  four-year  operating  lease for
computerized  mailing and  shipping  equipment  with an  unrelated  party.  Rent
expense under this lease amounted to $21,527 for the year ended October 31, 1998
and $25,030 for the year ended October 31, 1997.

(7)    RELATED PARTY AGREEMENTS

Since February 1, 1995, the Company has entered into employment  agreements with
the  individual  who is the Company's  Chairman,  President and Chief  Executive
Officer and its previously sole stockholder  which typically have a term of less
than two years.  Annual  compensation  under the  agreements  consists of salary
payments equal to 1 percent of the previous fiscal year's net sales and provides
for sales commissions equal to 1 percent of the positive  difference between the
current  fiscal  year's  net  sales  and the  prior  fiscal  year's  net  sales.
Compensation  under this agreement  amounted to $506,986,  $521,889 and $521,889
for the years ended October 31, 1999, 1998 and 1997, respectively.

(8)    EMPLOYEE BENEFITS

The Company's independently administered  self-insurance program provides health
insurance  coverage for employees and their  dependents on a  cost-reimbursement
basis. Under the program,  the Company is obligated for claims payments.  A stop
loss  insurance  contract  executed with an insurance  carrier  covers claims in
excess of $35,000 per covered individual and $769,913 in the aggregate per year.
During the years ended October 31, 1999, 1998 and 1997,  total claims expense of
$837,488,  $725,535 and $872,582,  respectively,  was incurred, which represents
claims processed and an estimate for claims incurred but not reported.

Effective January 1, 1994, the Company adopted a 401(k) retirement savings plan.
To become eligible for the plan, an employee must complete six months of service
and be at least 21 years of age.  The plan  allows  participants  to  contribute
through  salary  reduction  up to 7 percent of their  annual  compensation  on a
pretax  basis during the 1999 and 1998 fiscal years and up to 6 percent of their
annual  compensation  on a pretax  basis  during the 1997 fiscal  year.  Company
matching  contributions  are two dollars for every one dollar  contributed by an
employee up to 4 percent of the employees' annual compensation. The Company made
matching  contributions  to the plan of $365,887,  $353,096 and $313,365 for the
years ended October 31, 1999, 1998 and 1997, respectively.

The Company and its previously sole stockholder adopted on March 1, 1996 a stock
incentive  plan  which is  called  the  Optical  Cable  Corporation  1996  Stock
Incentive  Plan  (the  "Plan").  The Plan is  intended  to  provide  a means for
employees to increase their personal financial interest in the Company,  thereby
stimulating  the efforts of these  employees and  strengthening  their desire to
remain with the Company  through  the use of stock  incentives.  The Company has
reserved  4,000,000  shares of common stock for  issuance  pursuant to incentive
awards under  the Plan.  At October 31,  1999,  there were  3,528,150 additional


                                       32
<PAGE>

                          OPTICAL CABLE CORPORATION
                    Notes to Financial Statements (Continued)
                   Years Ended October 31, 1999, 1998 and 1997

shares available for grant under the Plan. Although not required under the Plan,
stock  options  granted to date have been  granted at not less than fair  market
value on the date of grant. The options have terms ranging from 8.75 to 10 years
and vest 25 percent after two years,  50 percent  after three years,  75 percent
after four years and 100 percent after five years.

The per share  weighted-average  estimated  fair value of stock options  granted
during  1997 and 1996 was $9.38 and  $2.18,  respectively,  on the date of grant
using the Black-Scholes option-pricing model with the following weighted-average
assumptions:  1997 - expected  cash dividend  yield of zero  percent,  risk-free
interest  rate of 6.08  percent,  expected  volatility  of 85.5  percent  and an
expected  life of 8.75  years;  1996 -  expected  cash  dividend  yield  of zero
percent,  risk-free interest rate of 6.28 percent,  expected  volatility of 85.5
percent and an expected life of 10 years.

The  Company  applies  APB  Opinion  No.  25 in  accounting  for its  Plan  and,
accordingly,  no compensation  cost has been recognized for its stock options in
the financial  statements.  Had  compensation  cost for the Company's  Plan been
determined consistent with SFAS No. 123, the Company's net income and net income
per  share  would  have  been  reduced  to the SFAS No.  123 pro  forma  amounts
indicated below:

<TABLE>
<CAPTION>


                                                                            YEARS ENDED OCTOBER 31,
                                                                --------------------------------------------------
                                                                    1999              1998              1997
                                                                --------------    --------------   ---------------
<S>                                                          <C>                 <C>              <C>
Net income:
    As reported                                              $       8,304,640   $     7,269,964  $      7,807,146
                                                                ==============    ==============   ===============
    Pro forma                                                $       7,961,412   $     6,926,736  $      7,638,186
                                                                ==============    ==============   ===============
Net income per share:
    Net income per common share:
       As reported                                           $           0.220   $         0.190  $          0.202
                                                                ==============    ==============   ===============
       Pro forma                                             $           0.211   $         0.181  $          0.197
                                                                ==============    ==============   ===============
    Net income per common share - assuming dilution:
       As reported                                           $           0.219   $         0.188  $          0.200
                                                                ==============    ==============   ===============
       Pro forma                                             $           0.210   $         0.180  $          0.196
                                                                ==============    ==============   ===============

</TABLE>


                                       33
<PAGE>

                        OPTICAL CABLE CORPORATION
                    Notes to Financial Statements (Continued)
                   Years Ended October 31, 1999, 1998 and 1997


Stock option activity during the periods indicated is as follows:
<TABLE>
<CAPTION>

                                                                             NUMBER OF        WEIGHTED-AVERAGE
                                                                              SHARES           EXERCISE PRICE
                                                                           --------------   ---------------------
<S>                                                                              <C>           <C>
Balance at October 31, 1996                                                      442,000       $    2.500
    Granted                                                                      254,000           11.125
    Forfeited                                                                    (32,500)           6.348
                                                                           --------------
Balance at October 31, 1997                                                      663,500            5.613
    Exercised                                                                    (79,350)           2.500
    Forfeited                                                                    (15,000)           9.400
                                                                           --------------
Balance at October 31, 1998                                                      569,150            5.948
    Exercised                                                                    (79,800)           2.500
    Forfeited                                                                    (17,500)           8.910
                                                                           --------------
Balance at October 31, 1999, (104,125 options exercisable;
    257,350 options at exercise price of $2.50 per share
    with remaining contractual life of 6.5 years, and 214,500
    options at exercise price of $11.125 per share with
    remaining contractual life of 6.5 years)                                     471,850      $     6.421
                                                                           ==============
</TABLE>


(9)    BUSINESS  AND  CREDIT  CONCENTRATIONS,  MAJOR  CUSTOMERS  AND  GEOGRAPHIC
       INFORMATION

On  November 1, 1998,  the  Company  adopted  SFAS No.  131,  Disclosures  about
Segments of an  Enterprise  and Related  Information.  SFAS No. 131  establishes
standards  for the way public  business  enterprises  are to report  information
about  operating  segments in annual  financial  statements  and requires  those
enterprises to report selected  information about operating  segments in interim
financial reports.  It also establishes  standards for related disclosures about
products and services, geographic areas and major customers.

The Company has a single  reportable  segment for purposes of segment  reporting
pursuant to SFAS No. 131. In addition,  the Company's fiber optic cable products
are similar in nature.  Therefore,  the Company  has  disclosed  enterprise-wide
information  about geographic areas and major customers below in accordance with
the provisions of SFAS No. 131. Prior years' corresponding  information has been
restated to conform with the requirements of SFAS No.
131.

The  Company  provides  credit,  in the normal  course of  business,  to various
commercial enterprises,  governmental entities and not-for-profit organizations.
Concentration of credit risk with respect to trade receivables is limited due to
the Company's  large number of customers.  The Company also manages  exposure to
credit risk through credit approvals,  credit limits and monitoring  procedures.
Management  believes  that  credit  risks at October 31, 1999 and 1998 have been
adequately provided for in the financial statements.  As of October 31, 1999 and
1998, there were no significant  amounts  receivable from any one customer other
than those described below.


                                       34
<PAGE>

                            OPTICAL CABLE CORPORATION
                    Notes to Financial Statements (Continued)
                   Years Ended October 31, 1999, 1998 and 1997

For the year ended October 31, 1999, 30.6 percent or  approximately  $15,513,000
of net sales were attributable to two major domestic distributors.  The combined
related trade  accounts  receivable for these  distributors  at October 31, 1999
totaled  approximately  $3,294,000.  No  single  customer  or other  distributor
accounted  for more than 5 percent of net sales for the year ended  October  31,
1999. As of October 31, 1999,  no single  customer or other  distributor  had an
outstanding  balance  payable  to the  Company  in excess of 5 percent  of total
stockholders' equity.

For the year ended October 31, 1998, 27.3 percent or  approximately  $13,817,000
of net sales were attributable to two major domestic distributors.  The combined
trade  accounts  receivable for these  distributors  at October 31, 1998 totaled
approximately  $2,989,000. No single customer or other distributor accounted for
more than 5 percent  of net sales for the year ended  October  31,  1998.  As of
October 31, 1998, one of these major  distributors  had an  outstanding  balance
payable to the Company in excess of 5 percent of total  stockholders'  equity in
the amount of approximately $1,630,000.

For the year ended October 31, 1997, 21.7 percent or  approximately  $11,338,000
of net sales were attributable to two major domestic distributors.  The combined
related trade  accounts  receivable for these  distributors  at October 31, 1997
totaled  approximately  $2,265,000.  No  single  customer  or other  distributor
accounted  for more than 5 percent of net sales for the year ended  October  31,
1997.

For the years ended October 31, 1999, 1998 and 1997, 80 percent,  78 percent and
73 percent, respectively, of net sales were from customers located in the United
States,  while 20 percent,  22 percent and 27 percent,  respectively,  were from
international  customers.  Net sales attributable to the United States and other
foreign  countries for the years ended  October 31, 1999,  1998 and 1997 were as
follows:

<TABLE>
<CAPTION>


                                                          YEARS ENDED OCTOBER 31,
                                            ------------------------------------------------
                                                 1999            1998             1997
                                            ---------------  --------------  ---------------
<S>                                      <C>                <C>                <C>
United States                            $       40,687,466 $    39,621,544    $  38,197,004
Australia                                           702,780       1,570,536        1,181,098
Canada                                            1,756,928         889,702          996,318
England                                             694,680         987,154        1,018,543
Germany                                             497,720         695,079        1,598,828
Korea                                                91,391              --        1,166,519
Sweden                                              589,949         633,175        1,076,680
Other foreign countries                           5,677,723       6,191,703        6,953,860
                                            ---------------  --------------  ---------------
                   Total net sales       $       50,698,637 $    50,588,893       52,188,850
                                            ===============  ==============  ===============

</TABLE>

None of the Company's long-lived assets are located outside the United States.

(10)   INCOME TAXES

Total  income  taxes for the years ended  October 31,  1999,  1998 and 1997 were
allocated as follows:


                                       35
<PAGE>


                            OPTICAL CABLE CORPORATION
                    Notes to Financial Statements (Continued)
                   Years Ended October 31, 1999, 1998 and 1997

<TABLE>
<CAPTION>

                                                                            YEARS ENDED OCTOBER 31,
                                                                --------------------------------------------------
                                                                    1999              1998              1997
                                                                --------------    --------------   ---------------
<S>                                                          <C>                 <C>              <C>
Income from operations                                       $       4,214,096   $     4,107,495  $      4,149,794
Stockholders' equity, for disqualifying disposition
    of stock options exercised                                        (209,207)         (150,359)               --
                                                                --------------    --------------   ---------------
                                                             $       4,004,889   $     3,957,136  $      4,149,794
                                                                ==============    ==============   ===============
</TABLE>


Income tax expense  attributable  to income from  operations for the years ended
October 31, 1999, 1998 and 1997 consists of:

<TABLE>
<CAPTION>

YEAR ENDED OCTOBER 31, 1999                                        CURRENT          DEFERRED           TOTAL
                                                                --------------    --------------   ---------------
<S>                                                          <C>                <C>               <C>
U.S. Federal                                                 $       3,729,606  $         60,479  $      3,790,085
State                                                                  416,736             7,275           424,011
                                                                --------------    --------------   ---------------
                   Totals                                    $       4,146,342  $         67,754  $      4,214,096
                                                                ==============    ==============   ===============
YEAR ENDED OCTOBER 31, 1998                                        CURRENT          DEFERRED           TOTAL
                                                                --------------    --------------   ---------------
U.S. Federal                                                 $       3,733,231  $        (69,192) $      3,664,039
State                                                                  451,779            (8,323)          443,456
                                                                --------------    --------------   ---------------
                   Totals                                    $       4,185,010  $        (77,515) $      4,107,495
                                                                ==============    ==============   ===============
YEAR ENDED OCTOBER 31, 1997                                        CURRENT          DEFERRED            TOTAL
                                                                --------------    --------------   ---------------
U.S. Federal                                                 $       3,654,654  $         78,224  $      3,732,878
State                                                                  406,165            10,751           416,916
                                                                --------------    --------------   ---------------
                   Totals                                    $       4,060,819  $         88,975  $      4,149,794
                                                                ==============    ==============   ===============

</TABLE>

Reported  income tax expense for the years ended October 31, 1999, 1998 and 1997
differs from the "expected" tax expense,  computed by applying the U.S.  Federal
statutory income tax rate of 35 percent to income before income tax expense,  as
follows:
<TABLE>
<CAPTION>

                                                                           YEARS ENDED OCTOBER 31,
                                                                --------------------------------------------------
                                                                    1999              1998              1997
                                                                --------------    --------------   ---------------
<S>                                                          <C>               <C>               <C>
"Expected" tax expense                                       $       4,381,558 $       3,982,111 $       4,184,929
Increase (reduction) in income tax expense resulting from:
    Foreign Sales Corporation benefit                                 (326,662)         (122,282)         (248,048)
    State income taxes, net of federal benefits                        254,359           288,822           254,592
    Other differences, net                                             (95,159)          (41,156)          (41,679)
                                                                --------------    --------------   ---------------
                   Reported income tax expense               $       4,214,096 $       4,107,495 $       4,149,794
                                                                ==============    ==============   ===============

</TABLE>


                                       36
<PAGE>


                            OPTICAL CABLE CORPORATION
                    Notes to Financial Statements (Continued)
                   Years Ended October 31, 1999, 1998 and 1997

The tax effects of temporary  differences that give rise to significant portions
of the  Company's  net  deferred  tax asset as of October  31, 1999 and 1998 are
presented below:
<TABLE>
<CAPTION>
                                                                                          OCTOBER 31,
                                                                                 --------------------------------
                                                                                      1999             1998
                                                                                 ---------------   --------------
<S>                                                                            <C>               <C>
Deferred tax assets:
    Accounts receivable, due to allowance for doubtful accounts                $       118,911     $      117,205
    Inventories, due to additional costs inventoried for tax
       purposes pursuant to the Tax Reform Act of 1986                                  71,564             68,628
    Self-insured health care costs, due to accrual for financial
       reporting purposes                                                               58,739             41,208
    Compensated absences due to accrual for financial reporting
       purposes                                                                         48,812             37,262
                                                                                 -------------     --------------
                   Total gross deferred tax assets                                     298,026            264,303
    Less valuation allowance                                                                --                 --
                                                                                 -------------     --------------
                   Net deferred tax assets                                             298,026            264,303
Deferred tax liabilities:
    Plant and equipment, due to differences in depreciation and
       capital gain recognition                                                       (179,789)          (118,121)
    Other receivables, due to accrual for financial reporting purposes                 (91,374)           (51,565)
                                                                                 -------------     --------------
                   Total gross deferred tax liabilities                               (271,163)          (169,686)
                                                                                 -------------     --------------
                   Net deferred tax asset                                      $        26,863     $       94,617
                                                                                 =============     ==============
</TABLE>

Based on the  Company's  historical  and  current  pretax  earnings,  management
believes  that it is more likely than not that the recorded  deferred tax assets
will be realized.

(11)   FAIR VALUE OF FINANCIAL INSTRUMENTS

SFAS No. 107,  Disclosures About Fair Value of Financial  Instruments,  requires
the Company to disclose estimated fair values of its financial instruments. SFAS
No. 107 defines the fair value of a financial  instrument as the amount at which
the  instrument  could be exchanged  in a current  transaction  between  willing
parties.  The  carrying  amounts  reported in the balance  sheet for cash,  cash
equivalents, trade accounts receivable, other receivables,  accounts payable and
accrued  expenses  approximate fair value because of the short maturity of these
instruments.

As of October 31, 1999, the carrying amount and fair value of the Company's note
receivable  were $93,605 and $86,250,  respectively.  The fair value of the note
receivable was estimated  by discounting the future cash flows of the instrument
at an  estimated  interest  rate for loans of similar  terms to  companies  with
comparable credit risk.

(12)   NET INCOME PER SHARE

The following is a reconciliation  of the numerators and denominators of the net
income per common share computations for the periods presented:


                                       37
<PAGE>

                            OPTICAL CABLE CORPORATION
                    Notes to Financial Statements (Continued)
                   Years Ended October 31, 1999, 1998 and 1997


<TABLE>
<CAPTION>

                                                                 NET INCOME          SHARES          PER SHARE
YEAR ENDED OCTOBER 31, 1999                                      (NUMERATOR)       (DENOMINATOR)       AMOUNT
                                                                --------------    ---------------  ---------------

<S>                                                          <C>                      <C>        <C>
Net income per common share                                  $       8,304,640        37,669,309 $           0.220
                                                                                                   ===============
Effect of dilutive stock options                                            --           240,622
                                                                --------------    --------------
Net income per common share - assuming dilution              $       8,304,640        37,909,931 $           0.219
                                                                ==============    ==============   ===============
                                                                 NET INCOME          SHARES          PER SHARE
YEAR ENDED OCTOBER 31, 1998                                      (NUMERATOR)       (DENOMINATOR)       AMOUNT
                                                                --------------    ---------------  ---------------

Net income per common share                                  $       7,269,964        38,287,271             0.190
                                                                                                   ===============
Effect of dilutive stock options                                            --           288,247
                                                                --------------    --------------
Net income per common share - assuming dilution              $       7,269,964        38,575,518 $           0.188
                                                                ==============    ==============   ===============
                                                                 NET INCOME          SHARES          PER SHARE
YEAR ENDED OCTOBER 31, 1997                                      (NUMERATOR)       (DENOMINATOR)       AMOUNT
                                                                --------------    --------------   ---------------

Net income per common share                                  $       7,807,146        38,675,416 $           0.202
                                                                                                   ===============
Effect of dilutive stock options                                            --           341,867
                                                                --------------    --------------
Net income per common share - assuming dilution              $       7,807,146        39,017,283 $           0.200
                                                                ==============    ==============   ===============

</TABLE>

Stock options that could  potentially  dilute net income per common share in the
future that were not included in the  computation of net income per common share
-  assuming  dilution  because  to do so would  have been  antidilutive  totaled
227,500 for the year ended October 31, 1998. No such antidilutive  stock options
existed  with  respect  to net  income  per  common  share -  assuming  dilution
calculation for the years ended October 31, 1999 and 1997.


(13)   STOCKHOLDERS' EQUITY

The Company's  Board of Directors  has  authorized  the  repurchase of up to $20
million  of the  Company's  common  stock in the  open  market  or in  privately
negotiated  transactions.  Through October 31, 1999, the Company has repurchased
1,420,295 shares of its common stock for $14,863,675 in such transactions  since
the inception of the Company's share repurchase program in October 1997.


(14)   CONTINGENCIES

The  Company is  involved  in various  claims and legal  actions  arising in the
ordinary  course  of  business.  In the  opinion  of  management,  the  ultimate
disposition  of these  matters  will not have a material  adverse  effect on the
Company's financial position, results of operations or liquidity.


                                       38
<PAGE>

                          OPTICAL CABLE CORPORATION
                    Notes to Financial Statements (Continued)
                   Years Ended October 31, 1999, 1998 and 1997


(15)   QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The following is a summary of the unaudited  quarterly results of operations for
the years ended October 31, 1999 and 1998:

<TABLE>
<CAPTION>


                                                                           QUARTER ENDED
                                                  ----------------------------------------------------------------
YEAR ENDED OCTOBER 31, 1999                        JANUARY 31        APRIL 30         JULY 31        OCTOBER 31
                                                  --------------  ---------------  --------------   --------------
<S>                                             <C>              <C>              <C>              <C>
Net sales                                       $     10,841,939 $     12,434,733 $    12,602,659  $    14,819,306
Gross profit                                           4,722,187        5,710,552       5,424,127        7,294,749
Income before income taxes                             2,252,663        3,057,265       2,899,109        4,309,639
Net income                                             1,448,235        1,963,327       1,816,583        3,076,495
Net income per common share                                0.038            0.052           0.048            0.082
Net income per common share -
    assuming dilution                                      0.038            0.052           0.048            0.082
</TABLE>

<TABLE>
<CAPTION>

                                                                           QUARTER ENDED
                                                   ----------------------------------------------------------------
YEAR ENDED OCTOBER 31, 1998                        JANUARY 31        APRIL 30         JULY 31        OCTOBER 31
                                                  --------------  ---------------  --------------   --------------
<S>                                            <C>               <C>              <C>              <C>
Net sales                                      $      11,873,115 $    11,689,100  $    13,727,433  $    13,299,245
Gross profit                                           5,068,908       5,076,615        5,670,681        5,442,867
Income before income taxes                             2,808,872       2,646,442        3,072,777        2,849,368
Net income                                             1,822,972       1,712,448        1,991,374        1,743,170
Net income per common share                                0.047           0.045            0.052            0.046
Net income per common share -
    assuming dilution                                      0.047           0.044            0.052            0.045

</TABLE>


                                       39
<PAGE>


ITEM 9.  CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
         FINANCIAL DISCLOSURE

        None.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

    The  information  contained  in  the  Proxy  Statement  under  the  captions
"PROPOSAL  NO. 1,  ELECTION OF  DIRECTORS"  and  "EXECUTIVE  OFFICERS  AND OTHER
SIGNIFICANT  EMPLOYEES,   Executive  Officers"  concerning  directors,   persons
nominated to become directors, executive officers of the Company is incorporated
herein by reference.

ITEM 11.  EXECUTIVE COMPENSATION

    The  information  contained  in  the  Proxy  Statement  under  the  captions
"EXECUTIVE  COMPENSATION",  and under the caption  "PROPOSAL  NO. 1, ELECTION OF
DIRECTORS"  concerning  compensation  of directors,  is  incorporated  herein by
reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

    The  information   contained  in  the  Proxy  Statement  under  the  caption
"BENEFICIAL OWNERSHIP OF COMMON STOCK" is incorporated herein by reference.

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

    The information  contained in the Proxy Statement under the caption "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS" is incorporated herein by reference.


                                       40
<PAGE>


                                     PART IV

ITEM 14.     EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

      (a)    1.   Index of Financial Statements

                  The Company's financial statements and related information are
                  included  in Part  II,  Item 8 of this  Form  10-K on pages 22
                  through 39.

             2.   Index of Financial Statement Schedules

                  None.


                                       41
<PAGE>

             3.   Index of Exhibits

                  The documents  filed as exhibits to this Form 10-K pursuant to
                  Item 601 of Regulation S-K are:

                  3.1      Amended and  Restated  Articles of  Incorporation  of
                           Optical  Cable  Corporation  (as  amended)  (filed as
                           exhibit 3.1 to the Registrant's Annual Report on Form
                           10-K for the fiscal year ended October 31, 1997 (file
                           number   0-27022),   and   incorporated   herein   by
                           reference).
                  3.2      Bylaws  of  Optical  Cable  Corporation,  as  amended
                           (filed  as  exhibit  3.2 to the  Registrant's  Annual
                           Report on Form 10-K for the fiscal year ended October
                           31,  1997 (file  number  0-27022),  and  incorporated
                           herein by reference).
                  4.1      Form of certificate  representing Common Stock (filed
                           as exhibit 4.1 to the  Registrant's  Annual Report on
                           Form 10-K for the fiscal year ended  October 31, 1997
                           (file number  0-27022),  and  incorporated  herein by
                           reference).
                  10.1     Royalty  Agreement,  dated  November 1, 1993,  by and
                           between Robert Kopstein and Optical Cable Corporation
                           (filed as  exhibit  10.1 to the  Registrant's  Annual
                           Report on Form 10-K for the fiscal year ended October
                           31,  1997 (file  number  0-27022),  and  incorporated
                           herein by reference).
                  10.2     Assignment of Technology  Rights from Robert Kopstein
                           to Optical Cable Corporation, effective as of October
                           31, 1994 (filed as exhibit  10.2 to the  Registrant's
                           Annual  Report on Form 10-K for the fiscal year ended
                           October  31,   1997  (file   number   0-27022),   and
                           incorporated herein by reference).
                  10.3     Employment  Agreement  by and between  Optical  Cable
                           Corporation and Robert Kopstein,  effective  November
                           1, 1999.
                  10.4     Tax  Indemnification  Agreement,  dated as of October
                           19, 1995, by and between  Optical  Cable  Corporation
                           and Robert  Kopstein  (filed as  exhibit  10.4 to the
                           Registrant's  Annual  Report  on  Form  10-K  for the
                           fiscal  year ended  October  31,  1997  (file  number
                           0-27022), and incorporated herein by reference).
                  10.6     Loan  Agreement  dated  March 10, 1999 by and between
                           Optical Cable  Corporation  and First Union  National
                           Bank  (filed  as  Exhibit  10.6  to the  Registrant's
                           Quarterly  Report on Form 10-Q for the fiscal quarter
                           ended  January 31, 1999 (file  number  0-27022),  and
                           incorporated herein by reference).
                  10.7     Security  Agreement,  dated  April 25,  1997,  by and
                           between  Optical  Cable  Corporation  and First Union
                           National  Bank of Virginia  (filed as exhibit 10.7 to
                           the  Registrant's  Annual Report on Form 10-K for the
                           fiscal  year ended  October  31,  1997  (file  number
                           0-27022), and incorporated herein by reference).
                  10.8     Promissory  Note  dated  March  10,  1999  issued  by
                           Optical  Cable  Corporation  to First Union  National
                           Bank in the amount of $5,000,000  and the  Promissory
                           Note dated  March 10,  1999  issued by Optical  Cable
                           Corporation  to  First  Union  National  Bank  in the
                           amount of  $10,000,000  (filed as Exhibit 10.8 to the
                           Registrant's  Quarterly  Report  on form 10-Q for the
                           fiscal  quarter  ended  January 31, 1999 (file number
                           0-27022), and incorporated herein by reference).
                  10.9     Optical Cable  Corporation  Employee  Stock  Purchase
                           Plan  (filed  as  exhibit  10.9  to the  Registrant's
                           Quarterly  Report on Form 10-Q for the fiscal quarter
                           ended  July  31,  1998  (file  number  0-27022),  and
                           incorporated herein by reference).
                  23       Consent of KPMG LLP to  incorporation by reference of
                           independent  auditors'  report  included in this Form
                           10-K,  into  registrant's  registration  statement on
                           Form S-8.
                  27       Financial Data Schedule.

                                       42


<PAGE>

      (b)    Reports on Form 8-K

             None

      (c)    Exhibits

             The documents set forth in the index of exhibits above are filed as
             exhibits to this Form 10-K pursuant to Item 601 of  Regulation  S-K
             and, if not incorporated by reference, are attached hereto.


                                       43
<PAGE>

                                   SIGNATURES

      Pursuant  to the  requirements  of Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                   OPTICAL CABLE CORPORATION

   Date:  January 24, 2000          By  /s/ Robert Kopstein
                                        -------------------------------
                                        Robert Kopstein
                                        Chairman of the Board
                                        President and Chief
                                        Executive Officer

      Pursuant to the requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
registrant and in the capacities indicated as of January 24, 2000.

/s/ Robert Kopstein
-----------------------      Chairman of the Board, President,
   Robert Kopstein            Chief Executive Officer and Director
                               (principal executive officer)
/s/ Luke J. Huybrechts
-----------------------      Senior Vice President of Sales
   Luke J. Huybrechts          and Director

/s/ Kenneth W. Harber
-----------------------      Vice President of Finance, Treasurer,
   Kenneth W. Harber          Secretary and Director
                                  (principal financial and accounting officer)
/s/ Randall H. Frazier
-----------------------      Director
  Randall H. Frazier

/s/ John M. Holland
-----------------------      Director
   John M. Holland


                                       44
<PAGE>



                           INDEX TO ATTACHED EXHIBITS

             Exhibit No.                    Description

             10.3                           Employment  Agreement by and between
                                            Optical Cable Corporation and Robert
                                            Kopstein,   effective   November  1,
                                            1999.

             23                             Consent of KPMG LLP to incorporation
                                            by    reference    of    independent
                                            auditors'  report  included  in this
                                            Form   10-K,    into    registrant's
                                            registration statement on Form S-8.

             27                             Financial Data Schedule.



                                       45